Confidential Restriction on Publication Claimed

IN THE AUSTRALIAN COMPETITION TRIBUNAL

Statement

No . ACT of 2017 Tabcorp Holdings Limited

Proposed acquisition of Tatts Group Limited by Tabcorp Holdings Limited by way of scheme of arrangement

Statement of: Dr Eliot Forbes Address: 6 Racecourse Road, Deagon, Queensland 4017 Occupation: Chief Executive Officer Date: BMarch 2017 Contents

BACKGROUND 2

CURRENT ROLE AT RACING QUEENSLAND 2

PREVIOUS RACING INDUSTRY EXPERIENCE 2

OTHER REPRESENTATIVE ROLES 3

RACING QUEENSLAND 4

SOCIAL AND ECONOMIC CONTRIBUTION OF QUEENSLAND RACING INDUSTRY 5

RACING QUEENSLAND AND INDUSTRY FUNDING ARRANGEMENTS 6

ANNEXURES 11

SCHEDULE A 12

This document contains confidential information which is indicated as follows:

[HIGHLY Confidential to Racing Queensland and Tabcorp] [ .... ]

I, Dr Eliot Forbes, Chief Executive Officer (CEO) of the Racing Queensland Board, trading as Racing Queensland (Racing Queensland) in the State of Queensland say that:

Filed on behalf of Prepared by Law firm Tel +61 2 9263 4014 Fax _+6 :!.._? _92_6_3_41:.....:1__:.1______Email !woodward tlaw.com.au Level 35, Tower Two International Towers 200 Barangaroo Avenue, Barangaroo Address for service Sydney NSVV 2000 Confidential Restriction on Publication Claimed

BACKGROUND

I am currently the CEO of Racing Queensland and have held this role since 22 August 2016. have been involved in the racing industry for over 20 years as a clinical veterinarian and veterinary steward in Australia and overseas and in racing industry executive level roles.

2 I make this statement in relation to an application by Tabcorp Holdings Limited (Tabcorp) to the Australian Competition Tribunal for authorisation of the proposed merger of Tatts Group Limited (Tatts), in my position as CEO of Racing Queensland, and on behalf of Racing Queensland .

Current role at Racing Queensland

3 My appointment as CEO at Racing Queensland in August 2016 followed a complete change of the Racing Queensland Board as part of broader initiative of the Queensland Government to turnaround the financial position of Racing Queensland. It is well documented (including in the current Racing Queensland Annual Report) that the most significant challenge facing Racing Queensland is its financial position, as it has faced six straight years of losses, including a $21 .8 million loss for 2015-2016.

4 I have included a copy of the current Racing Queensland Annual Report for the 2015-2016 financial year (Annual Report) at Annexure EF-1 to this statement. I refer to the Annual Report throughout this statement.

5 Given the current financial position of Racing Queensland, my key strategic objective as CEO is to get Racing Queensland back onto a sustainable financial footing. Currently, some of Racing Queensland's shortfall is funded by the State Government, but there is an expectation from Government, and a commitment from Racing Queensland that it should become financially independent by growing revenue and managing costs.

6 As CEO of Racing Queensland, I am responsible for the ongoing management of the organisation in accordance with the strategy, policies and programs approved by the Racing Queensland Board (see Annexure EF-1, page 58). Currently there are 132 racing clubs located across the state of Queensland that fall under the broad governance of Racing Queensland (see Annexure EF-1, page 2).

7 As CEO, I am responsible for managing an executive leadership team that operates through each of the corporate service areas of Racing, Infrastructure, Sales and Marketing, Strategy, Financial Management and Legal.

Previous racing industry experience

8 I began my professional veterinarian career in the racing industry in 1995 and continued to work as a veterinarian, with a particular focus on equine veterinary practice, until June 2004. My

2 Confidential Restriction on Publication Claimed

equine veterinary experience includes roles with international jockey clubs, such as the Macau Jockey Club, the Abu Dhabi Equestrian Club and the Qatar Racing and Equestrian Club.

9 Between 2004- 2010, I was employed by the Emirates Racing Authority (ERA) as the Veterinary Steward, as well as serving as an executive member of the ERA steering committee and sitting on the ERA Steward's Panel from 2005-2010 and on the Appeals Panel from 2006- 2010.

10 In my capacity as Veterinary Steward at the ERA, I was responsible for racing operations, equine welfare and drug control for the world's richest race, the US$1 0 million Dubai World Cup. In my role on the ERA steering committee, I was responsible for the strategic and operational oversight of all racing regulatory functions in the United Arab Emirates.

11 During my time at the ERA, I had a key role in successfully launching the equine operations of a new $3 billion Meydan racecourse in 2010, as well as leading ERA staff and industry participants through a transformation of race day operations and critical integrity processes.

12 Prior to commencing my current role at Racing Queensland, I was the CEO of Tasracing, the Tasmanian State-owned three-code racing body, from August 2012- August 2016. Before my appointment as CEO of Tasracing, I held the role of Chief Operating Officer at Tasracing from July 2010- July 2012. During my tenure at Tasracing, I:

(a) delivered successful commercial outcomes, including a financial turnaround of the company, restoring it to profitability in 2016, driven by, inter alia, race field revenue growth of 53% over a three year period;

(b) was responsible for the implementation of new technologies, including the StrideMASTER sectional timing system to assist with thoroughbred performance analysis; and

(c) secured key media rights agreements as well as the expansion of the international export of the Tasmanian racing product into France, Singapore and South Africa.

Other Representative Roles

13 I currently hold the following additional racing representative roles:

(a) Alternate Director, board of Racing Australia;

(b) Alternate Director, board of Greyhounds Australasia.

(c) Member of Veterinary and Analysts Committee for Racing Australia, Harness Racing Australia and Greyhounds Australasia;

3 Confidential Restriction on Publication Claimed

(d) Chairman of the Retirement of Racehorses Committee of Racing Australia;

(e) Member of the Standardbred Welfare Advisory Group for Harness Racing Australia; and

(f) Member of the steering committee of the International Forum for the Aftercare of Racehorses.

14 I have also previously held the following relevant positions in the racing industry:

(a) Alternate Director- Racing Information Services Australia (2013- 2015);

(b) Executive Director to Racing Australia Board (2012-2015);

(c) Executive Council representative, Asian Racing Federation (2006- 2007); and

(d) Executive Council representative, International Group of Specialist Racing Veterinarians (2004- 201 0) .

RACING QUEENSLAND

15 The Racing Queensland Board, trading as Racing Queensland (previously the Queensland All Codes Racing Industry Board trading as Racing Queensland), was established under the Racing Act 2002 (QLD) on 1 May 2013 and is a statutory body under the oversight of the Minister for Racing (see Annexure EF-1, page 2). Racing Queensland oversees the strategic direction for all codes in Queensland (see Annexure EF-1, page 30) .

16 Racing Queensland is the control body for the three codes of racing (thoroughbred, harness and greyhound) in Queensland and coordinates, manages and regulates the industry including by:

(a) making rules of racing;

(b) licensing race clubs and venues and monitoring their activities and performance;

(c) allocating race dates;

(d) administering industry funding and commercial arrangements;

(e) providing an effective and efficient system for the distribution of prize money; and

(f) representing the Queensland racing industry on the three peak national bodies: Racing Australia, Harness Racing Australia and Greyhounds Australasia Limited (see Annexure EF-1, page 41) .

4 Confidential Restriction on Publication Claimed

Social and economic contribution of Queensland racing industry

17 The racing industry in Queensland contributes to the State Government's objectives for the community in a number of ways, in particular by creating jobs and contributing to the economy.

18 I am aware that Racing Queensland commissioned IER Pty Ltd to prepare the "Size and Scope of Racing in Queensland" report that was completed in April 2009 (the Size and Scope Report). A copy of the Size and Scope Report is at Annexure EF-2 to this statement. The Size and Scope Report indicates that the Queensland racing industry employs 29,000 individuals in full time, part time and casual employment (see Annexure EF-2, page 5). Those individuals are employed in a range of vocations from horse and greyhound trainers to veterinary surgeons, stewards, administrators, jockeys and drivers.

19 Importantly, the industry provides employment, occupation and opportunity to many people from a wide diversity of backgrounds and skills. This public benefit is most pronounced in regional areas.

20 The Queensland racing industry also facilitates employment in a range of related industries from feed and stock to transport and civil works. Breeding industries attract investment from overseas and interstate and produce a range of employment opportunities for Queenslanders (see Annexure EF-1, page 18).

21 Racing is conducted across more than 110 venues throughout the State of Queensland, with racecourses in metropolitan and country areas playing a key role in bringing communities together.

22 There is a high level of participation in the racing industry in Queensland, as there is throughout Australia. The Annual Report cites the Racing Australia Fact Book in support of this, noting that there were approximately 75,000 individuals in Australia who owned a racehorse in 2014-2015. This means one in every 320 Australians has an interest in a racehorse, compared to just one in around every 8000 people in Great Britain (see Annexure EF-1, page 7).

23 Australia has the highest or second highest horse ownership, prizemoney, venues, races, breeding animals and race day attendances per capita in the world. Consequently, our affinity with and love of the animal and race is second to none and is an essential part of the fabric of many communities, especially those in regional and rural areas.

24 Racing also provides an essentially egalitarian ethos as a battler's horse can and often does beat a billionaire's in races from the Melbourne Cup through to a country race .

5 Confidential Restriction on Publication Claimed

RACING QUEENSLAND AND INDUSTRY FUNDING ARRANGEMENTS

25 The racing industry in Queensland, and elsewhere in Australia, is sustained by wagering revenue as its largest source of income (see Annexure EF-1, page 8, 20) . Racing Queensland collects fees from wagering operators, based on wagering turnover and/or net revenue, which it then distributes to the three racing codes, primarily in the form of prize money. In 2015-2016, Racing Queensland received total wagering revenue of $203.3million.

26 UBET Qld Pty Ltd (UBET), owned by Tatts, is currently the exclusive licence holder for race and sports wagering in Queensland. UBET operates the "UBET pool" and pools together pari­ mutuel bets from Queensland, Northern Territory, South Australia and Tasmania.

27 Racing Queensland has a 30-year product agreement in place with UBET, which commenced on 1 July 2014. As part of this agreement, Racing Queensland receives a variable product fee associated with racing, being 39% of gross wagering revenue (both pari-mutuel and fixed odds) and an annual fixed fee of $15million , indexed at 80% of CPl.

28 Racing Queensland also receives revenue from wagering operators, including corporate bookmakers, in the form of "race information fees". This revenue is a function of legislation that requires wagering providers to pay a fee for the use of each Australian State's race field information (see Annexure EF-3, page 55). Under these arrangements, Racing Queensland sets a fee for the use of its race field information and wagering services providers who elect to accept wagers on Queensland racing must pay this fee (see Annexure EF-3, page 55) . The fee set for the use of Racing Queensland's race field information is lower than the variable product fee payable by UBET.

29 A priority for Racing Queensland is addressing the challenging financial conditions it has faced over the last 5 years. As reported in the Annual Report, Racing Queensland delivered five years of operating losses and had no cash reserves to fund ongoing losses and a loss of $21.8m for 2015- 2016 (see Annexure EF-1, page 22).

30 As a result, the State Government agreed to fund Racing Queensland's operational cash shortfalls for the short term, on the understanding that Racing Queensland would implement a plan for delivering sustainable operations. Following extensive consultation with State Government, Racing Queensland released the "Tracking Towards Sustainability Plan" (the TTS Plan) on 3 December 2015. A copy of the TTS Plan is at Annexure EF-3 to this statement.

31 As prizemoney makes up the largest portion of Racing Queensland's expenditure, the TTS introduced an amendment to prizemoney levels taking into consideration the profitability of the industry overall and the profitability of each code. The amendment to prizemoney levels including details of the percentage reduction in prizemoney introduced by the TTS Plan is set out on pages 77 to 80 of the TTS Plan (see Annexure EF-3).

6 ( Confidential Restriction on Publication Claimed

32 As outlined in the TTS Plan, Racing Queensland considered that a shift in wagering turnover and the changing nature of industry returns was adversely impacting Racing Queensland's revenue. In particular, the TTS Plan identified the following four key factors in respect of the shift in wagering turnover and the changing nature of industry returns:

(a) the move away from traditional pari-mutuel betting towards fixed odds betting had reduced Racing Queensland's revenue;

(b) increased interstate product fees;

(c) wagering activity through corporate bookmakers has increased , while UBET's wagering turnover has plateaued since FY12; and

(d) sports wagering has continued to grow (see Annexure EF-3, page 28) .

33 The TTS Plan forecast that although wagering activity was expected to increase in Queensland, Racing Queensland's revenue was anticipated to decrease due to:

(a) the increase in wagering activity through corporate bookmakers, from which Racing Queensland receives a lower return; and

(b) the shift towards fixed odds wagering, which leads to a lower return for Racing Queensland than traditional pari-mutuel wagering (see Annexure EF-3, page 31) .

34 The findings of the TIS Report are consistent with my own industry experience, in that I have observed profound shifts in wagering customer behaviour over recent years including a shift towards fixed odds wagering from pari-mutuel betting, as well as a marked decline in wagering through traditional channels, such as retail channels, with the rise of digital and mobile wagering, in particular with corporate bookmakers. There has also been significant growth in wagering on sports which is a competing wagering product.

7 Confidential Restriction on Publication Claimed

35 The graphs below, extracted from the TTS Plan (see Annexure EF-3, page 28) , show the increase in corporate bookmaker's share of wagering turnover between FY2011 - FY2015:

FY15 - $3.24bn turnover FY11 -$2.918bn turnover Betting U11£T, EMchan~e. Betting S5l6.9m, $178.311\, Exdlange, 18% 6,.. Sl91l.8m, 6%

Corporates, Corporstes, $1.01bn, S493.6m, i~~ 17o/o

Totes, $1.54bn, 47o/,

36 This decline in UBET's share of wagering revenue negatively affects the revenue that Racing Queensland receives as bets placed with UBET provide Racing Queensland with greater returns than bets placed with corporate bookmakers or interstate totes (page 58 of Annexure EF-3 contains a table which sets out the comparison for the 2015 Financial Year).

VIEWS ON THE PROPOSED MERGER OF TABCORPAND TATTS

37 I am aware of Tabcorp's proposal to acquire the issued shares of Tatts by way of scheme of arrangement (the Proposed Transaction), including from attending briefings and holding discussions with Tabcorp executives regarding the Proposed Transaction.

38 I consider that the Proposed Transaction is significant to the racing industry in Queensland because the clear majority of racing industry funding comes from UBET and, if the Proposed Transaction proceeds, this revenue source would ultimately come from a different partner.

39 When I first became aware of the Proposed Transaction, I identified as a general commercial concern the relative size and importance of the Queensland operations under a merged entity and the possibility that this could lead to less of a focus on the Queensland racing industry, given the larger wagering markets in NSW and Victoria. I was concerned that, following the Proposed Transaction, Queensland would shift from being the most prominent wagering and racing state under UBET, to less commercially significant for the combined entity.

40 Following the announcement of the Proposed Transaction, Racing Queensland relayed this concern to senior representatives of Tabcorp over the period from in or around November 2016 and in or around March 2017. As a result of those discussions, a confidential commercial arrangement has been reached between Racing Queensland and Tabcorp which satisfactorily

8 Confidential Restriction on Publication Claimed

resolves my concerns, [HIGHLY Confidential to Racing Queensland and Tabcorp] -

41 [HIGHLY Confidential to Racing Queensland and

42 [HIGHLY Confidential to Racing Queensland and

9 Confidential Restriction on Publication Claimed

43 With the confidential commercial arrangement between Tabcorp and Racing Queensland referred to at paragraph 39 in place, I believe that the Proposed Transaction will be meaningfully beneficial overall to Racing Queensland. I consider that it is likely to improve the financial sustainability of the Queensland racing industry, which is our primary focus. This would in turn facilitate greater financial independence from the Queensland Government and reduce the need for direct financial support from public finances.

44 Generally, and quite aside from the commercial arrangement, I consider that the Proposed Transaction is likely to deliver better returns for the racing industry in Queensland because of the relative strength of Tabcorp's business when compared to Tatts. I consider that Tabcorp is better positioned to compete with corporate bookmakers and has the potential to deliver an improved wagering product in Queensland because Tabcorp has:

(a) invested in innovative technologies, such as the Longitude system (for which I understand Tabcorp holds the exclusive licence), which I consider will help it to develop innovative parimutuel products. This should help to reinvigorate the tote product and put it in a better position to compete with "exotic" products offered by corporate bookmakers;

(b) a strong track record managing its yield on its fixed odds book; and

(c) a strong, longstanding "TAB" brand in the retail channel, that Queenslanders are familiar with and relate to.

45 I understand that Tabcorp considers that one of the potential benefits of the Proposed Transaction is that the merged entity potentially provides a pathway to national pooling. As there has never been a national totalisator pool in Australia, I consider there is a degree of uncertainty around the overall impact a national pool would have in terms of wagering and racing industry funding. However, I do consider that the smaller harness and greyhound codes, which have smaller totalisator pools, would undoubtedly benefit from a national pool, as larger pools provide stability and may reinvigorate pari-mutuel wagering for these codes in competition with the fixed odds offerings of corporate bookmakers. This in turn would lead to greater funding flows to Racing Queensland.

46 If, as I expect it would, the Proposed Transaction does result in financial and racing industry funding benefits to Racing Queensland, I consider that one area that these funds would be directed would be to enhance funding for stakes prize money. Racing Queensland is mindful of the need to provide enhanced and comparable prize money to the that on offer in New South Wales and Victoria, as prize money is an essential component of sustaining the depth and quality of Queensland race fields.

47 Racing Queensland is familiar with and has an effective working relationship with Tabcorp (and its subsidiary Sky Racing) and is confident that we can work with them as the wagering operator

10 Confidential Restriction on Publication Claimed

in Queensland . It is imperative to Racing Queensland's financial sustainability that it has a stronger, successful and effective wagering partner and the success of the Queensland racing industry depends on it, because Racing Queensland's wagering partner provides the primary source of industry funding.

ANNEXURES

48 Set out in Schedule "A" of my statement is a table of annexures that I refer to in my statement.

Signature

Dr Eliot Forbes, Chief Executive Officer, Racing Queensland.

f4,..__ Date: 8' March 2017

11 Confidential Restriction on Publication Claimed

SCHEDULE A

TABLE OF ANNEXURES REFERRED TO IN STATEMENT OF DR ELIOT FORBES

Annexure Title Colilfidentiality

EF-1 Racing Queensland Annual Report 2015-2016 -

"Size and Scope of Racing in Queensland", IER Pty EF-2 - Ltd, dated April 2009

Racing Queensland "Tracking Towards EF-3 - Sustainability Plan·: dated 3 December 2015

12 TBP.001.027.1747

ANNUAL REPORT FOR QUEENSLAND ALL CODES RACING INDUSTRY BOARD

2015-16 TBP.001.027.1748

QUEENSLAND

September 14, 2016

The Hon Grace Grace Minister for Employment and Industrial Relations Minister for Multicultural Affairs and Minister for Racing

Dear Minister Grace

RE: ANNUAL REPORT 2015-16 FOR THE QUEENSLAND ALL CODES RACING INDUSTRY BOARD I am pleased to present the Annual Report 2015-16 and financial statements for the Queensland All Codes Racing Industry Board trading as Racing Queensland.

I certify that this annual report complies with:

The prescribed requirements of the Financial Accountability Act 2009 and the Financial and Performance Management Standard 2009, and the detailed requirements set out in the Annual report requirements for Queensland Government agencies.

A checklist outlining the annual reporting requirements can be found on page 42 of this annual report.

Yours faithfully

Steve Wilson AM Chair Racing Queensland TBP.001.027.1749

CONTENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 1

Annual Report for Queensland All Codes Racing Industry Board 2015-16 contents ISSN 2202-4409

Purpose of the report

This annual report details the financial and non-financial performance of the About Racing Queensland 2 Queensland All Codes Racing Industry Board trading as Racing Queensland Organisation Mission and Values 3 from July 1, 2015 to June 30, 2016. Service Areas and Restructuring 4 It highlights the work, achievements, activities and strategic initiatives of Racing Queensland and satisfies the requirements of Queensland’s Financial CHAIRMAN’S REPORT 6 Accountability Act 2009. Statement from the Acting CEO 8 Your feedback Major 2015-2016 Initiatives 9 The annual report is an important document representing communication and accountability. Racing Queensland values comments and welcomes Strategy for the year ahead 10 feedback from readers.

To provide feedback, please email: [email protected] Individual Racing Code Highlights Thoroughbred This publication can be accessed and downloaded from our website: 12 http://www.racingqueensland.com.au/Industry-Services/ Harness 14 About-Us/Annual Report Greyhound 16 Alternatively, hard copies of this publication can be obtained by emailing: [email protected] Queensland Government’s Objectives for the Community 18

Copyright Financial Performance 19 © Queensland All Codes Racing Industry Board 2016. Racing Queensland Revenue 20 Copyright inquiries should be addressed to [email protected] Wagering Turnover Summary 21 or Racing Queensland, Lot 2 Racecourse Rd, Deagon QLD 4017. Racing Queensland Expenditure 22 Licence Three Codes Individual Performance 23 Country Racing Contribution 26 This annual report is licensed by the State of Queensland (Racing Queensland) under a Creative Commons Attribution (CC BY) 4.0 Training Track Subsidy 27 Australia licence. Industry Licensing 28

Objectives and Key Performance Indicators 29

Disclaimer Board and Management 30 This document has been prepared with all due diligence and care, based on Board Appointments – Racing Queensland 32 the best available information at the time of publication. Racing Queensland Our People 34 holds no responsibility for any errors or omissions within this document. Executive Leadership Team 35 Any decisions made by other parties based on this document are solely the responsibility of those parties. Corporate Governance 36 Direction from the Minister 37 Further information Audit and Risk Committee 38 Further information regarding this report may be obtained by contacting Internal Audit 38 Racing Queensland as follows:

Phone: Glossary of Terms 39 (07) 3869 9777 ACRONYMS 40 Email: [email protected] BOARD MEETINGS 41 By mail: PO Box 63 COMPLIANCE CHECKLIST 42 SANDGATE QLD 4017 FINANCIAL STATEMENTS 43 In person: Racing Queensland, Lot 2 Racecourse Rd, Deagon QLD 4017

September 2016 TBP.001.027.1750

2 RACING QUEENSLAND ANNUAL REPORT 2015-16 THE ORGANISATION

About Racing Queensland

The Queensland All Codes Racing Industry The functions of the All-Codes Board are to drive for Board (Racing Queensland) came into being commercial outcomes by: through an Act of Queensland Parliament on May 1, 2013 and is a statutory board under the • Identifying, assessing and developing responses oversight of the Minister for Racing. to strategic issues • Developing and implementing responses to Racing Queensland is a statutory body strategic challenges established under the Racing Act 2002. Racing Queensland’s primary purpose is to promote, • Leading and facilitating negotiations between enhance and provide a platform to service the racing codes and other entities about the industry across the three codes of strategic issues and agreements that affect racing: Thoroughbred, Greyhound racing codes either individually or as a whole and Harness. Racing Queensland’s • Identifying priorities for capital expenditure core mission is to look after the provision of governance and • Developing and implementing plans and services to the industry while strategies to promote, develop and market empowering clubs to racing’s codes manage and administer • Making recommendations and reporting their own facilities. to the minister Racing Queensland maintains its head office at Racecourse Road in Deagon, Queensland and has regional offices in Toowoomba, Rockhampton and Townsville.

There are currently 132 racing clubs located across the State of Queensland.

LEGEND

1 SOUTH EAST QLD 2 eastern downs 3 downs 4 capricornia 5 central west 6 leichardt 7 north west qld 8 far north qld

1 TAB CluB 1 REGIONAL CluB TBP.001.027.1751

THE ORGANISATION RACING QUEENSLAND ANNUAL REPORT 2015-16 3

ORGANISATION MISSION AND VALUES

Racing Queensland’s mission statement is to take the industry forward through the implementation of C.A.R.E:

COLLABORATE: Working together for the benefit of the racing industry

ASSIST: Providing assistance and services to encourage people in the industry to be self-sufficient and viable

REGULATE: Regulating the industry to ensure integrity and compliance with standards, policies and rules

ENABLE: Enabling the industry to participate in racing.

Racing Queensland’s values are:

• Professional and ethical. We will at all times be professional and ethical in our dealings with stakeholders and colleagues • Results-orientated. We will ensure that our day-to-day activities are consistent with and contribute to achieving our goals • Teamwork. We are committed to working as a team to deliver the best solutions for our stakeholders, recognising and rewarding both team and individual contributions • Stakeholder service excellence. We strive to serve our customers with excellence • Balance between professional and personal life. We recognise people are our main asset so achieving a balance between professional and personal time is in the best interests of individuals and the organisation. TBP.001.027.1752

4 RACING QUEENSLAND ANNUAL REPORT 2015-16 THE ORGANISATION

Service Areas and Restructuring

Service Area deSCRIPTION

Stewarding, Integrity The department is made up of the Operational Steward’s Panels, Integrity Regulatory Unit, Betting and Licensing Services Compliance and Monitoring Division, Veterinary Services Division and Licensing and Registrations Division. Its purpose is to provide the highest level of integrity services to the industry’s participants and supporters. The restructure of Integrity Services in light of the Commission of Inquiry was a key priority in 2015-16 and is now reflected in the separation of Queensland Racing Integrity Commission (QRIC) from Racing Queensland.

Animal Welfare The restructure of Integrity Services including animal welfare services in light of the Commission of Services Inquiry was a key priority in 2015-16 and is now reflected in the separation of animal welfare from Racing Queensland, into the QRIC structure.

Training As a registered training organisation, Racing Queensland offers nationally recognised training thanks to funding assistance from the Department of Education and Training. Racing Queensland provides ongoing industry-standard training and mentoring to apprentice and working jockeys/drivers, trainers, stable hands, track work riders and strappers, as well as industry employers. All programs delivered are from qualifications in the nationally recognised Racing Training Package.

Racing Operations Racing Queensland is responsible for developing the most innovative and effective allocation of race dates as well as allocating prizemoney and developing state-wide racing programs and feature race schedules that maximise wagering returns. The division also provides: • Representation on the Australian Pattern Committee and the National Racing Committee • An interface with the RISA Service Centre and the provision of handicapping services across the codes to the state • Management of breeding schemes

Infrastructure Key function is to deliver projects in line with the Industry Infrastructure Strategy (IIS) to create modern, and Safety 21st century racecourses, multi-purpose sports stadia and entertainment precincts.

Finance and IT Racing Queensland is responsible for policy and performance across the three codes of racing in the following areas and services: Information technology, prizemoney distribution, risk and compliance, commercial and industry analysis, industry insurances and club subsidy distribution.

Strategy, Marketing Racing Queensland is responsible for creating a sustainable industry for participants by maximising and Communications wagering revenue. The division maximises exposure and engagement in the industry’s three racing codes amongst the sports’ constituents and the broader community via its advertising and marketing programs. Media accreditation for Queensland racecourses is open to all practising media representatives but it is subject to Racing Queensland’s approval. Racing Queensland also implements and administers Race Information Fees across the corporate bookmaker network. Racing Queensland is responsible for the control of racing bookmakers in the state of Queensland.

Internal Audit Racing Queensland is accountable for examining, evaluating and monitoring the adequacy and effectiveness of controls that exist to regulate the activities and operations of Racing Queensland. Internal Audit maintains a program for the auditing of Clubs, including financial and governance aspects, as part of the annual Internal Audit Program. TBP.001.027.1753 TBP.001.027.1754

6 RACING QUEENSLAND ANNUAL REPORT 2015-16 CHAIRMAN’S REPORT

CHAIR’S REPORT

Queenslanders love sport and entertainment, The themes outlined in the TTS plan New Board and CEO and during 2015-16, Racing Queensland represent the start of a process that will steer has worked to advance the racing codes as the industry towards viability, with a view to Following my appointment to the position competitive, vibrant and growing sports. creating a strong and sustainable future. of Interim Chairman of Racing Queensland in April 2016, Racing Minister Grace Grace Although the past financial year has been We are pleased that the Queensland announced the full composition of a new one of substantial losses and immense Government is supporting Racing Racing Queensland Board. These appointments change, I am confident in future years Queensland and the industry during this now see a Board in place with demonstrated we will look back on this time as a crucial important transition period. achievements in business, media, marketing, turning point, pivotal to setting a strong property, tourism and racing. future for our industry. Over time, Racing Queensland is committed to becoming more financially independent The skills of this talented group will be The Board’s resolve has been to focus on from Government, but our industry must invaluable as we chart a course towards strengthening the business and offerings show true leadership, managing our costs success and we are a Board committed to to meet an ever-changing marketplace, while growing revenue. delivering outcomes. while limiting the impacts these changes may have on stakeholders. The Board will be supported by newly Establishing the QRIC appointed Chief Executive Officer Dr Eliot Forbes. Certainly, we at Racing Queensland have Financial issues are not the only challenge a major responsibility to seek to work we as an industry face. There is no doubt Eliot is a Queenslander returning home with all our partners for the improvement the actions of those involved in the vile with proven performance in the commercial of racing – but all codes, clubs and practice of live baiting in Greyhounds has management of racing. He is also a qualified participants also have a role to play in had far-reaching consequences on all veterinarian who brings with him the unique creating and delivering events with the codes, most obviously in New South Wales. combination of a deep interest in animal capacity to attract new fans, whilst also welfare, and a global understanding of all remembering the fine traditions of racing. In Queensland, we acted aggressively aspects of racing from club, owner, trainer, with the formation of the Queensland rider, punter and spectator. Financial Position Racing Integrity Commission (QRIC) which commenced operations on July 1, 2016. The Racing Queensland’s financial position Growing the Industry establishment of the QRIC model sees the continues to present the most significant complete separation of commercial and Australia is renowned as a great sporting challenge, producing a parent entity loss integrity aspects of the Queensland industry. nation and we are blessed with the of ($19.9m) compared with an ($11.2m) likes of “The Race that Stops a Nation” loss in 2015 or ($21.8m) versus ($12.7m) on This separation allows Racing Queensland and Queensland’s own Winter Racing a consolidated basis. to concentrate on the business of racing Carnival. In addition to these big-city and QRIC, on ensuring the welfare of our This result was not unexpected, but with events, there is hardly a Queensland animals and integrity within the industry. country community whose biggest sports six straight years of losses and cash day and community event isn’t its country reserves depleted, it is unsustainable. On May 1, 2016 Ross Barnett was cup race meeting. All of these are vital appointed as Queensland’s first Racing Fiscal reform is imperative and this Board and to racing’s fabric and contribute towards Integrity Commissioner. Ross is a former its leadership are committed to improvement. keeping racing a vibrant part of the deputy commissioner of the Queensland Australian sporting landscape. This reform includes the Tracking Towards Police Service and worked for nearly Sustainability (TTS) Plan announced on 40 years as one of the state’s most The Racing Australia Fact Book tells us December 3, 2015. distinguished officers. there were around 75,500 individuals in Australia who raced a Thoroughbred The TTS plan was developed after an Animal welfare is an essential part of racehorse in 2014-15. This means one in extensive consultation process with racing’s DNA and Racing Queensland will every 320 Australians has an interest in a industry participant groups, and is focussed fully support QRIC in maintaining a ‘Gold racehorse compared to just one in around on prudent expenditure management. Standard’ of care for our animals. every 8000 people in Great Britain. TBP.001.027.1755

CHAIRMAN’S REPORT RACING QUEENSLAND ANNUAL REPORT 2015-16 7

Expand these numbers to include dampen the spirits of enthusiasts however, the many thousands of Harness and with such high quality fields of interstate and Greyhound owners across Australia and it overseas competitors taking on Queensland’s is clear that racing retains a place in the best. Fans were buoyed when Ohoka Punter heart and soul of Australians. defeated a field of Australasian stars in the $200,000 Group 1 Blacks A Fake. Yet despite these outstanding attributes, community connection with racing across There were many firsts for the Greyhound code the nation is shrinking and we must during the year with the Cairns Greyhound address this as a priority. Racing Club conducting their first televised TAB race meeting and the Capalaba Greyhound Racing across all codes needs more Racing Club becoming the trial venue for markets, more fans, more owners and a Racing Queensland’s live streaming channel. fresh approach to attract participants to this On the track, it was probably the ‘Queen of the deeply connected industry. It is imperative Creek’, Cyndie’s Magic, who stole the heart of that racing reaches out and into the Greyhound fans throughout the year. communities our 132 racing clubs service. Thankyou Highlights on the track In closing, I would like to take this The 2016 racing season delivered some opportunity to thank Ian Hall and Sam outstanding highlights across all codes. Adams who, as Acting CEOs, safely guided the organisation through a turbulent time. I Record wagering turnover results on Magic would like to commend the staff of Racing Millions Race Day signified the importance of Queensland for their dedication, hard work Australia’s richest race day to fans. The event and achievements in difficult times. high-point for many was surely the success of Queensland icon, Buffering, who has This is also an opportune time to place on become a cult hero and of course others were record the contribution of The Honourable captivated by the performance of Capitalist John Muir QC who, for most of the 2016 who took out the Two-Year-Old Classic. financial year, single handedly assumed the role of the Queensland All Codes The pinnacle of the Thoroughbred season Racing Industry Board. We are indebted to is the Queensland Winter Racing Carnival. his outstanding leadership during a time The Carnival delivered well, despite poor of significant change and challenge. weather resulting in the abandonment of Oaks Day and the delay of the much Finally, I would like to acknowledge and anticipated return to Eagle Farm. thank the Honourable Grace Grace MP, Minister for Employment and Industrial The cancelled meeting did provide an Relations, Minister for Multicultural Affairs opportunity to re-program key races to and Minister for Racing, for her enthusiasm Stradbroke Handicap Day the following and genuine support of our industry. week and with four Group 1 and four Group 2 races, fans were treated to a Super Saturday of racing which included the outstanding performance of Under the Louvre when taking out the $1.5m Stradbroke Handicap.

The Queensland Winter Carnival’s Harness Steve Wilson AM feature, Blacks A Fake final night, was also hampered by weather conditions. It didn’t Chair – Racing Queensland TBP.001.027.1756

8 RACING QUEENSLAND ANNUAL REPORT 2015-16 ACTING CEO’S REPORT

Statement from the Acting CEO

As mentioned by the Chair, there were comprised total wagering of approximately encouraging engagement and many challenges for our organisation $2.5bn for Thoroughbreds, $450m for participation in the racing industry. and industry in the 2015-16 financial year Harness and $630m for Greyhounds, but as a result, Racing Queensland has representing a year-on-year growth of Although the racing industry has had its mapped a path to a sustainable future for 9.4 per cent. Of course, this growth is offset challenges in recent times, there is reason Queensland’s racing codes. by the changing dynamics of the wagering for greater optimism for the future of the industry. The movement from totalisator racing industry in Queensland. The first stage in the much-needed betting to fixed-odd betting, and the I am confident we are heading in the right financial transformation process was the continued growth of corporate bookmakers, direction. The focus of the business is very establishment of the TTS Plan in the first has impacted overall yields. half of 2016. Before TTS was implemented, much on getting things done and working unsustainable prizemoney levels and Throughout 2015-16, Racing Queensland with the industry, our partners and customers expenditure had Racing Queensland introduced a range of initiatives aimed to deliver a product which is renowned as budgeting a well-publicised loss of ($28m). at driving growth in wagering turnover being the wagering product of choice. including innovative promotions such as the In just a short time, the TTS Plan has Origin Jockey Series, the UBET Picket Fence started to improve Racing Queensland’s and the UBET Super Six Trainers’ Challenge. financial position, reducing the parent company loss to ($19.9m). The inaugural Origin Jockey Series was introduced for the 2015 Summer Racing We still have a long way to go and Carnival and attracted some of Australasia’s Sam Adams constraining expenditure whilst seeking to leading jockeys including three-time grow revenue, will remain common themes Melbourne Cup winning jockey Glen Boss, Acting CEO Racing Queensland for the foreseeable future. champion Victorian jockey, Craig Williams, and New Zealand’s leading riders, Opie Industry Milestones Bosson and Danielle Johnson.

The 2015-16 financial year saw key The UBET Picket Fence promotion attracted milestones for the industry in Queensland some of Australasia’s best pacers to race with the return to racing at the redeveloped at the Queensland Winter Racing Carnival Eagle Farm, along with the re-opening of the including New Zealand superstar, Christen upgraded Townsville track at Cluden Park. Me, HectorJayJay (Victoria), Major Crocker (Victoria) and Nek Time (NZ). In addition to these major projects, Racing Queensland has also made key changes to The UBET Super Six Trainers’ Challenge was the Thoroughbred race dates calendar for developed in order to enhance the calibre of 2016-17 which features the re-introduction interstate and Queensland horses entered of Tuesday racing and the development for the six Group 1 days of the Thoroughbred of extended day/night race meetings that Queensland Winter Racing Carnival, and will feature up to 12 races. Both of these in-turn, drive wagering and interest in the initiatives will provide additional wagering state’s showpiece event. opportunities for the industry. These concepts are all new measures which The re-introduction of Tuesday racing has will be reviewed and refined over time. led to 19 race meetings being transferred to the premier channel of Sky Racing 1 which Racing Queensland also recently engaged would not be possible if run on Saturdays. the services of rugby league superstar and Queensland sporting icon, Billy Slater, as Total wagering turnover on the three codes an ambassador for all three racing codes. of racing in Queensland increased from As part of his role, Slater will attend $3.2bn in 2014-15 to $3.5bn in 2015-16. This race meetings across Queensland, TBP.001.027.1757

MAJOR INITIATIVES RACING QUEENSLAND ANNUAL REPORT 2015-16 9

Major 2015-16 Initiatives

As an industry in a highly competitive sporting and replace the funding withdrawn under TTS and assist business environment, we must be race-ready and country race clubs to build capacity, improve their resolute in maintaining and increasing our relevance financial performance and ultimately reduce their and market share. Progress in a fast-changing world dependence on Racing Queensland subsidies. is impossible without change. Establishment of the Queensland Now more than ever it is vital the industry comes together to work as one to address the challenges Racing Integrity Commission that confront us, such as aging infrastructure, animal In April 2016, legislation was passed facilitating welfare needs and our financial viability. the split of the commercial and integrity functions Throughout the past financial year, a number of of Racing Queensland via the formation of the initiatives were put in place to help tackle some of Queensland Racing Integrity Commission (QRIC). the challenges we face, with the major ones outlined Ross Barnett, one of the state’s most senior police in the following pages. officers, was appointed as QRIC’s first Commissioner and formal separation of the QRIC and Racing Tracking Towards Sustainability Plan Queensland commenced on July 1, 2016. QRIC is responsible for racing integrity and animal welfare. The Racing Queensland Tracking Towards Sustainability (TTS) Plan was a significant project Club Liaison and Development undertaken by Racing Queensland in 2015-16. TTS was prepared in accordance with the Treasurer’s In 2015-16, Racing Queensland introduced a newly direction of August 27, 2015 requiring Racing formed Club Liaison and Development Team to Queensland to prepare a plan that would enable it to enable Racing Queensland to better assist the state’s return to profitability from July 1, 2016. race clubs in the development of alternate revenue streams and to improve management across the At this time, past operating losses had exhausted industry’s three racing codes. Racing Queensland’s cash reserves and with a loss of approximately $28m budgeted on a business as Reporting to Head of Operations, the team is usual basis for 2015-16, there was a clear and urgent managed by David Aldred and will assist clubs need to take action. with a variety of operational functions including annual club licensing, wagering data, race day TTS was developed after an extensive consultation operations, race meeting subsidies, training track process with industry participant groups. The Plan subsidies, minimum standards, venue compliance, endeavoured to balance the needs of the racing workplace health and safety, minor projects, venue industry’s various participant groups and to ensure development, accessing funding grants, corporate that, through the consultation process, there are sponsorship, alternative events and event planning. no unforeseen adverse consequences for any The Club Liaison and Development Team will also participant group. manage CRSP during the next four years. Most significantly, TTS announced the introduction Club Liaison and Development is already making of new prizemoney levels from April 1, 2016. a difference in this area with the development of Importantly, the revised prizemoney levels remain new digital reporting technology to record track higher than those in place before the prizemoney inspections and racetrack manager’s track ratings in increases implemented on October 1, 2014. real-time. This information is then supplied to clubs Several key cost reduction initiatives outlined in TTS and industry service providers as necessary. related to non-TAB country racing. Another popular team initiative is the Q-Club The Queensland Government subsequently E-Newsletter which has up to date industry news for announced the introduction of the Country Racing each of the three racing codes with news and photo Support Program (CRSP), which is designed to help contributions from race clubs throughout the state. TBP.001.027.1758

10 RACING QUEENSLAND ANNUAL REPORT 2015-16 STRATEGY AHEAD

Strategy for the year ahead

Racing Queensland is focused on delivery. We know Challenge How it is being addressed action continues to be needed to create confidence and (Opportunities) strong foundations for future growth. There is no good reason why racing cannot have a bright and profitable Budget pressures • The implementation of TTS. future here in Queensland. • In consultation with participants, develop a Strategic Plan with vision and focus on growth. We have a top quality product, top quality animals and • Strengthen governance, policies and procedures. importantly top quality people from world-class jockeys • Enhance Business Intelligence Systems. and drivers to premier breeders and trainers. We need to unlock this talent and potential to improve economic Returns to owners and • Focus thinking and strategy on revenue returns and grow our contribution to Queensland. participants improvements and allow participants to directly benefit from wagering growth. Throughout 2016-17 we will build on the work of the • Implement programs that attract new owners to the racing industry. past year as we continue to tackle the challenges before us and also take advantage of some significant Improve wagering • Strengthen the partnership between opportunities on the horizon. performance the Queensland racing industry, Racing Queensland and UBET. The following table provides a snapshot of the • Implement marketing programs that grow challenges facing the entire industry and the proactive engagement with existing punters and attract new customers to racing including developing mitigation plans and actions in place to address them. Racing Queensland’s digital assets. • Create additional opportunities for wagering service providers to market and promote Queensland racing. • Improve wagering opportunities by making continuous improvements to the racing calendar. • Develop a racing program that balances the need for club sustainability and the need to maximise wagering outcomes. • Develop an equitable Race Information Fee Policy that maximises revenue for the racing industry. • Implement programs that stimulate long-term revenue growth and address current stagnation of wagering growth on Queensland racing product. • Develop opportunities with UBET to maintain and retain pari-mutuel customers. • Ensure Queensland’s racing vision is widely available to all stakeholders.

Ageing infrastructure, • Racing Queensland will develop an Infrastructure facilities and racetracks Plan that manages the funds available and supports projects which demonstrate value creation for the racing industry.

Balance club needs for • Develop a clear, transparent and sustainable funding support against funding model for clubs. the overall budget position of the industry TBP.001.027.1759 TBP.001.027.1760

12 RACING QUEENSLAND ANNUAL REPORT 2015-16 CODE REPORTS

Individual Racing Code Highlights

Thoroughbred

The volume of TAB racing remains strong with level of profile and media attention across the 417 race meetings conducted and 3110 individual nation. New Zealand ultimately took out the races being run. team honours but Queensland, Victoria and New South Wales ensured it went right down to the Non-TAB racing’s outcomes were also pleasing with wire. As is always the case, the Carnival built to more than 11,400 starters contesting 1401 races. a crescendo with Magic Millions Day proving the highlight. The quality of the winners was high, a Despite a decrease in the foal crop from the season prime example of this was when the Magic Millions prior, the QTIS scheme again provided significant Two-Year-Old Classic was taken out by the Peter returns to stakeholders. The mere fact that a filly and Paul Snowden trained juvenile, Capitalist, winning a QTIS race at a Saturday metropolitan who subsequently went on to further glory in the race meeting can pocket more than $76,000 for autumn by winning the Golden Slipper. her connections speaks for the scheme and it is hoped it will be the catalyst for long-term growth. The pinnacle of Queensland’s racing product is of course the Winter Racing Carnival, which returned Club infrastructure, and specifically tracks, to its more traditional format. It again proved to be undoubtedly played a pivotal role in the very successful and was highlighted by the eagerly Thoroughbred code throughout the season. anticipated return to Eagle Farm, even though it The ongoing effects of the continued outage was delayed by a week due to torrential weather at Eagle Farm lingered and the ramifications and the subsequent cancelling of Oaks Day. The of its unavailability were significant, both from silver lining for the code was a “Super Saturday” racing and wagering perspectives. Eagle Farm’s of racing on Stradbroke Handicap Day after the long awaited return on Stradbroke Day was not Brisbane Racing Club and Racing Queensland without teething issues but the state’s industry decided to re-program some of the feature races can rightly look forward to having its premier from Oaks Day. The result was a landmark day racing venue back at the peak of its powers. The for the industry in Queensland, during which four redevelopment of the track at Townsville also had Group 1 races and four Group 2 races were run. a major impact on racing in North Queensland during the early part of the season. That process It was particularly pleasing from a local has, however, laid the platform for the future of perspective to see two Queensland-trained racing at the Cluden Park venue, which is now an horses victorious in Group 1 races. In some excellent racing surface. outstanding training efforts, Bryan Guy and Kelly Schweida produced Eagle Way and Miss Cover The Summer Carnival, which commenced in Girl to win the Queensland Derby and Tattersall’s earnest at Doomben in late November, saw the Tiara respectively. New Zealand trainer Tony majority of the Group race spoils stay within Pike, also had a Carnival to remember, taking the state, with Queensland based trainers, Tony the lion’s share of the purses of the Queensland Gollan, Toby Edmonds and Kevin Kemp, amongst Oaks and J.J Atkins back across the Tasman with the most successful. The Carnival also included Provocative and Sacred Elixir. The time-honoured the hosting of the inaugural UBET Origin Jockey Stradbroke Handicap, saw a two-horse war unfold Series which attracted high profile jockeys such over the concluding stages, with the Robert as Glen Boss, Craig Williams and Opie Bosson Smerdon-trained, Under The Louvre, prevailing to ride in Queensland, attracting a significant over Darren Weir’s Black Heart Bart. TBP.001.027.1761

CODE REPORTS RACING QUEENSLAND ANNUAL REPORT 2015-16 13

The full list of Group 1 winners for the season was:

RACE HORSE TRAINER JOCKEY

JJ ATKINS SACRED ELIXIR Tony Pike Zac Purton

QUEENSLAND OAKS PROVOCATIVE Tony Pike Leith Innes

QUEENSLAND DERBY EAGLE WAY Bryan Guy Tommy Berry

BTC CUP MALAGUERRA Lee & Anthony Freedman Glen Colless

DOOMBEN 10,000 MUSIC MAGNATE Bjorn Baker Kerrin Mcevoy

STRADBROKE HANDICAP UNDER THE LOUVRE Robert Smerdon Dwayne Dunn

TATTERSALL’S TIARA MISS COVER GIRL Kelly Schweida Damian Browne

DOOMBEN CUP OUR IVANHOWE Lee & Anthony Freedman Kerrin Mcevoy

Pleasingly, from a wider industry and breeding mention needs to be made of the achievement of perspective, the Australian Pattern Committee Lloyd who has had some immense challenges to ratings for the eighty Black Type Races run overcome in recent times. throughout the season were very strong. It is sheer testimony to Jeff’s character and The season’s Winter Carnival also saw the advent dedication that he was able to salute the judge in of the UBET Super Six Trainers’ Challenge won this taking out the premiership. year by Chris Waller. The series was a standout The race for the Apprentice rider title became a one- because the much-coveted major prize was the act affair when James Orman won 67 races (prior to choice of either a new BMW or a VIP Kentucky his apprenticeship ending before season’s end) and Derby trip for the successful trainer and six of his/ amassed over $3m in prizemoney for connections of her owners. The Waller juggernaut had a fruitful the horses he piloted. Carnival on many fronts with its Super Six Trainers’ Challenge win providing the final highlight. Premierships aside, all of the hard working trainers and riders throughout Queensland are to be Trainer Tony Gollan and his hard-working Eagle commended for their tireless efforts throughout Farm based team again took the spoils with a the entirety of the season. third straight Metropolitan Trainers’ Premiership. In what was a tremendous season for the stable, Finally, it would be remiss not to mention it amassed well over $4m in prizemoney for Buffering. The magnificent son of Mossman, connections with an impressive strike rate to boot. not only again flew the flag for the state in the nation’s premier sprints (winning two Group 1s In the jockey ranks, the Metropolitan title race and the Magic Millions QTIS Open), but took his was very keenly contested, with the evergreen, already remarkable career to higher levels by Jeff Lloyd, prevailing after a titanic struggle winning the highly prestigious Group 1 Al Quoz with perennial title aspirant, Jim Byrne. Special Sprint in Dubai in March. TBP.001.027.1762

14 RACING QUEENSLAND ANNUAL REPORT 2015-16 CODE REPORTS

Individual Racing Code Highlights

HARNESS

The structure of the Harness Racing Calendar Group 1 success for the first time, defeating the remained reasonably consistent with the previous brilliant Victorian, Hectorjayjay, and Ultimate Art financial year with regular TAB events held at Albion in a Grand Circuit quality field, which also featured Park (Tuesday, Friday and Saturday) and Redcliffe outstanding New Zealander, Christen Me, and (Wednesday and Thursday). The TAB meetings reigning Queensland Horse of the Year, Avonnova. were complimented by 12 Marburg Non-TAB race meetings, the Warwick Father’s Day meeting and The Group 1 QBRED Triad Finals were won by dual-code racing at Deagon, Gympie and Kilcoy. Changeoverme, who caused an upset in the Colts and Geldings division for trainer Kylie Rasmussen, Show Racing continued this year at Toowoomba, driver Mat Neilson, and owner/breeders Gayle, Nanango, Gympie, Boonah, Caboolture and the Chris and Rodney Garrard. Im Norma Jean Brisbane Exhibition, which continues to be well- collected the Fillies trophy for trainer Peter Greig, received and offers Harness racing great exposure visiting driver Amanda Turnbull and successful to a wider audience. owner/breeders, Jeff and Lee-Ann Wallace.

The 2015-16 Winter Carnival was successful from The Group 2 Queensland Derby attracted a great a programming perspective with plenty of high- cross-section of Australasia’s best three-year-olds, quality interstate and overseas competitors meeting with three Queenslanders meeting four New South Queensland’s best. Participation was enhanced by Wales based horses, three Victorian and two New the ground-breaking UBET Picket Fence Promotion, Zealand visitors. Queensland celebrated a local which created much talk and anticipation about victory with Catcha Lefty claiming victory for his the Carnival and saw trainers targeting particular emotional trainer, owner and breeder, Cristina pathways, as they attempted to win the bonus for Monte, and driver Shane Graham, in what was an winning three races on the trot. outstanding race.

Racing Queensland Ambassador and Queensland The win of Catcha Lefty provided a special tribute Rugby League Champion, Billy Slater, was a major to the gelding’s dam Lefty who produced two attraction on Oaks night during the Winter Carnival winners for Cristina on the night as Bring On Lefty – an event that produced some outstanding racing won the Rising Stars Championship earlier in the with top class Victorian, Hectorjayjay, producing an evening. Incredibly Lefty’s last foal, Lucky Lefty, astonishing performance to win the Sunshine Sprint. won days earlier providing the mare with the perfect record of 11 foals born and 11 winners. The final night of the Albion Park Winter Carnival saw a large crowd in attendance despite the The final running of Queensland’s only Grand poor weather conditions to witness the running Circuit race, the $200,000 Group 1 Queensland of three Group 1 races including Queensland’s Pacing Championship in October, saw 2015 Blacks biggest race of the year; The Blacks A Fake, the A Fake winner in Victorian-based Philadelphia two-year-old QBRED Triad Finals and the Group Man return to Queensland as a short-priced 2 Queensland Derby. Attracting a fine field of favorite. However, it was an all-local finish with Australasian superstars, the $200,000 Blacks the Ian Gurney trained Our Hi Jinx claiming Group A Fake was taken out by Ohoka Punter, trained 1 glory from Caesars Folly and Avonnova in a by young Nathan Purdon. Ohoka Punter tasted highly competitive and entertaining race. TBP.001.027.1763

CODE REPORTS RACING QUEENSLAND ANNUAL REPORT 2015-16 15

Group One Winners

RACE HORSE DRIVER TRAINER

GOLD COAST CUP Bling It On Luke McCarthy Belinda McCarthy

DARRELL ALEXANDER My Valerie NZ Pete McMullen Blake Fitzpatrick MEMORIAL TROTTING CHAMPIONSHIP

QUEENSLAND PACING Our Hi Jinx NZ Greg Sugars Ian Gurney CHAMPIONSHIP

QBRED Triad Final – Frankie Rocks Grant Dixon Grant Dixon 3YO Colts & Geldings

QBRED Triad Final – Get In The Groove Grant Dixon Grant Dixon 3YO Fillies

QBRED Triad Final – Changeoverme Mathew Neilson Kylie Rasmussen 2YO Colts & Geldings

QBRED Triad Final – Im Norma Jean Amanda Turnbull Peter Greig 2YO Fillies

The Blacks A Fake Ohoka Punter Nathan Purdon Nathan Purdon

Queensland’s best young drivers did battle Racing Queensland introduced a number in the 2016 BOTRA Queensland Young of initiatives during 2015-16 in an attempt to Drivers Championship and the series was enhance the wagering product. These initiatives taken out by former New South Wales driver have resulted in favorable results, namely: Paul Diebert, defeating Matt Elkins and • A reduction in the number of races Amy Rees. Special congratulations to all containing odds-on favorites by 3 per cent, drivers who competed in the series for their when compared to the previous financial year conduct and professionalism. (38.1 per cent 2014-15, 35.1 per cent 2015-16). Queenslander Grant Dixon was recognised • Average field sizes up 5.5 per cent from 9.1 on a National level for his success as winner in 2014-15 to 9.6 in 2015-16. of the National Trainer’s Premiership with 246 winners in the 2015-16 season, 25 clear of his • Foal numbers increased by 8 per cent to nearest rival. 365 in 2015-16. TBP.001.027.1764

16 RACING QUEENSLAND ANNUAL REPORT 2015-16 CODE REPORTS

Individual Racing Code Highlights greyhounds

On the track, few Greyhounds thrilled the dead-heat in the world’s richest Maiden, the Vince community as much as the Bill Elson-trained Curry Memorial, between Split Image and Paua to Cyndie’s Magic, largely due to her exciting racing Avoid, both trained by Tony Brett. Tony also had pattern of dropping out to last early and coming interstate success with Thirty Talks claiming the home like a rocket. She was dubbed ‘The New $100,000 Richmond Puppy Classic. Queen of the Creek’ by race caller Paul ‘Dogsy’ Further north, Dallas Beckett had a good year Dolan after winning 13 Class 1 races during the racing taking out the Rockhampton Grand Prix (510m) season. At the end of the year, she had collected and Anniversary Trophy (510m) with Twelve Plus three feature race victories in the President’s Cup Two, and the Rockhampton Young Guns (407m) (710m), the Rockhampton Cup (510m) and the with Little Ach Cee, who also ran 2nd to Cyndie’s Winter Chase (710m). Showing her capabilities at Magic in the Rockhampton Cup. the highest level, she was also Group 1 placed in both the Brisbane Cup (520m) and the Gold Cup Not Today Mate did well to win feature races in (710m). If you get the opportunity to watch her race both Bundaberg (RQ Maiden 1000 - 460m) and replays they are well worth the time and effort. Rockhampton (Young Guns - 510m). Rocket’s Magic established himself as the king of the north Fabulous Storm started the racing season with a for trainer, Rob Lound, with five feature race bang for Queensland trained Greyhounds winning victories at both Townsville and Cairns, including the Group 1 Winter Cup 520m for Reg Hazelgrove. the Young Guns (380m), Townsville Derby (498m), Interstate Greyhounds proved hard to beat in the Easter Sprint (380m), Anzac Trophy (498m) and other major Group races for the remainder of the Cairns Grand Prix (544m). year, with Dyna Double One (VIC) taking out the Group 1 Brisbane Cup (520m) and My Boy Brodie All told, 464 TAB meetings and 112 Non-TAB (NSW) taking out the Group 1 Gold Cup (710m). meetings were held in 2015-16. The number of individual races increased due to the volume of NSW Northern Rivers trainers had group race success nominations, resulting in extra races at Albion with Norm The Storm (Matthew Reid), Cash In Motion Park and Townsville. The average field size for TAB (Robert Cooke) and France Soir (Robert Cooke). races remained steady in comparison to 2014-15 at Queenslanders got some back with Velocity Shirl 7.8 Greyhounds per race. Wagering turnover and winning the Group 3 Big Dog Cup for Peter Wilson, revenue increased significantly throughout the year Magical Yessam winning the Group 2 Ipswich Auction in a clear show of confidence in the industry from Series for Don Massey, and who could forget the the punting community. TBP.001.027.1765

CODE REPORTS RACING QUEENSLAND ANNUAL REPORT 2015-16 17

Group One Winners

RACE HORSE TRAINER

WINTER CUP FABULOUS STORM Reg Hazelgrove

BRISBANE CUP DYNA DOUBLE ONE Mrs Andrea Dailly

GOLD CUP MY BOY BRODIE Mr Trevor Rice

Off the track, the Grading Policy Working Restricted class racing was also introduced of the Cairns Cup heats. The meeting was Party was established and introduced a for Maidens (no wins in six starts) and a great success for the industry with 10 number of changes designed to make 5th grades (no wins in the last six starts). races broadcast on Sky Racing 1. Emma racing more competitive in Queensland and Overall, the number of individual winners- Bryant and the team at Cairns must be to give opportunities to a wider spectrum to-races ratio increased from 36 per cent congratulated for the enormous amount of of Greyhounds. City class dogs are now in 2015 to 47 per cent in 2016, indicating work undertaken between April and June to upgraded on lower class tracks if they have that more Greyhounds are winning races make this event a reality. won more than four city races. The upgraded and having the chance to be competitive. city class Greyhounds were often victorious Further work will continue in this area in Capalaba became the trial venue for the in the higher grade and the standard of 5th 2016-17 with the introduction of Pathways establishment of a Racing Queensland live grade racing became more manageable for Racing (reverse selection order) and the streaming channel via Ustream, meaning genuine 5th grade Greyhounds. continued development of a National Grading for the first time, there was live vision and System which may incorporate ratings for all off-course wagering on Capalaba Non-TAB Further to this, Masters racing was introduced Greyhounds. meetings. The Ustream trial is expected to for the first time for 5th grade Greyhounds more continue at other Non-TAB venues in 2016-17. than 42 months of age. The concept requires The Cairns Greyhound Racing Club and further refinement with some dominant Capalaba Greyhound Racing Club both All-in-all 2015-16 will be remembered as a performers across the state but became a experienced first-time-ever events during watermark year for the Greyhound code as it regular fixture of the Ipswich (Friday) and the year. looks to rebuild after the live baiting scandal. Albion Park (Sunday) race meetings, and also There are strong signs though that the branched out to Bundaberg, Rockhampton and Cairns held its first televised TAB race industry is in recovery and looking forward Townsville during the year. meeting on June 28, 2016 with the running to the year ahead. TBP.001.027.1766

18 RACING QUEENSLAND ANNUAL REPORT 2015-16 THE ORGANISATION

Queensland Government’s Objectives for the Community

The racing industry in Queensland contributes Delivering quality frontline services to the State Government’s objectives for the community by: • Racing Queensland is committed to ensuring our staff are provided with opportunities to develop their vocations for their own individual Creating jobs and a diverse economy benefit and the benefit of the wider industry

• The Queensland Racing industry employs tens- • Racing Queensland is committed to providing of-thousands of people directly in a range of opportunities for those pursuing a career in vocations from horse and Greyhound trainers to the racing industry to have access to adequate veterinary surgeons, stewards, administrators, training in their chosen field jockeys and drivers • Providing opportunity for owners to participate • The racing industry also facilitates employment in the racing industry, at low cost in a range of supplementary industries from feed and stock to transport and civil works Building safe, caring and connected communities • Racing’s breeding industries attract investment from overseas and interstate and produce • Racing is conducted across more than 130 venues throughout the length and breadth a range of employment opportunities for of the state. Racecourses throughout Queenslanders metropolitan and country Queensland play a • Delivers capital works and industry role in galvanising communities as people come together to celebrate the iconic sport of racing. infrastructure programs

Protecting the environment

• All Racing Queensland-approved infrastructure projects are constructed in line with responsible development procedures and all relevant planning legislation, including those relative to environment and heritage protection

• Furthermore, all future development projects will be encouraged to explore the possibility of multi- use facilities to ensure the best-possible use of space, including sports facilities and park areas

• Vaccination of horse populations against viruses in areas impacted by “bat colonies” TBP.001.027.1767

FINANCIAL PERFORMANCE RACING QUEENSLAND ANNUAL REPORT 2015-16 19 financial performance

Annual Financial Statements Revaluation of Assets

The annual financial statements present the consolidated financial The financial statements report a $3.5m increase in the value of results for 2015-16 of the Queensland All Codes Racing Industry assets due to the independent valuations of all land, buildings and Board (QACRIB) trading as Racing Queensland, and its subsidiaries. tracks undertaken by Australis Asset Advisory Group using ‘fair value principles’ on June 30, 2016.

CONTROLLED ENTITIES OWNERSHIP Properties impacted by the increase in the asset revaluations Queensland Race Product Co Limited 100% surplus of $3.5m include: (dormant entity and was deregistered during • Rockhampton Racing Pty Ltd: $0.8m increase due to the net of $1.2m the year ended June 30, 2016) increase in the value of the administration building and facilities, ($0.1m) Sunshine Coast Racing Pty Ltd atf Sunshine 84.6% decrease in the value of the land, and decrease due to deferred tax Coast Racing Unit Trust liability on the 2015-16 revaluation of ($0.3m). Rockhampton Racing Pty Ltd 63.8% • Sunshine Coast Racing Pty Ltd: $0.2m increase in the land value, $0.2m increase in the value of the track, $0.2m increase in the value Since forming in 2010-11, the consolidated group has presented of the grass and synthetic tracks and track irrigation, $0.1m increase total comprehensive losses ranging between ($13.9m) in 2011- in the lighting and $0.2m increase across earthworks, drainage, 12 and ($3.8m) in 2012-13. The financial performance of the grandstand, and day stalls. consolidated group for 2015-16 is summarised: In addition to this, Racing Queensland also recorded a $1.5m increase in the value of land, buildings and tracks at the ENTITY FINANCIAL following locations: RESULTS • Albion Park: $0.6m increase in the value of the land. Racing Queensland ($19.9m) • Deagon: $0.3m increase in the value of the land and $0.2m Queensland Race Product Co Limited Nil increase in the assets primarily in the perimeter fence, grass Sunshine Coast Racing Pty Ltd atf Sunshine ($1.2m) and sand track, and the Deagon Office Building. Coast Racing Unit Trust • Slacks Creek (Logan) $0.3m increase in the value of the land. Rockhampton Racing Pty Ltd ($0.6m)

Consolidation adjustments ($0.1m)

Consolidated Group Loss for the Year ($21.8m)

Other Comprehensive Income where items will never be reclassified to profit or loss

Increase in asset revaluation surplus $3.5m

Total Comprehensive Loss ($18.3m)

The consolidated group loss of ($21.8m) for 2015-16 is primarily attributable to the financial performance of the group’s parent and main operating entity, Racing Queensland, which posted an annual loss of ($19.9m). TBP.001.027.1768

20 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL PERFORMANCE

RACING QUEENSLAND REVENUE

Wagering Wagering Revenue – UBET Other

Wagering revenue is the largest source of income for Racing The 30-year Product Agreement with UBET commenced on July Queensland. In 2015-16 Racing Queensland received gross wagering 1, 2014. As part of the agreement, Racing Queensland receives an revenue of $204.9m, an increase of $2.5m on 2014-15. annual fixed fee of $15m indexed at 80 per cent of CPI. In 2015-16, Racing Queensland received approximately $15.2m from UBET in Wagering Revenue – UBET the form of the fixed fee.

Total UBET turnover displayed an increase from 2014-15 of around Racing Queensland also received a return from UBET’s sports betting 2.1 per cent, however, wagering revenue received from UBET was operations of approximately $0.2m, down from $0.3m in 2014-15. $129.8m, down ($2.4m) on 2014-15. Revenue from Interstate Totes and The graph below highlights the decline in UBET turnover on Queensland Wagering Service Providers racing since the Eagle Farm track closure in August 2014. With the track’s reopening in June 2016, it is anticipated there will be a noticeable increase Race information fees reflect the revenue Racing Queensland in turnover into the future. Pleasingly, in 2015-16, UBET turnover on receives from interstate totes, corporate bookmakers and Queensland racing showed positive growth for the first time since 2011-12. betting exchanges for their wagering activities on Queensland racing product. Since the Eagle Farm track closure there has also been a visible increase in wagering through UBET on interstate and overseas racing products. Total Queensland race information fee turnover showed a healthy increase, with revenue (net of Queensland product fee rebates) up around $3.3m or 6 per cent on 2014-15. UBET Wagering Turnover – Queensland and Interstate

Race Information Fees – Turnover and Revenue (net of Product Rebate)

Pari-mutuel vs. Fixed Odds Wagering

Racing Queensland’s wagering revenue is impacted by customer movement between fixed odds and pari-mutuel betting. In recent years, there has been a continuing trend for customers to move away from pari-mutuel, preferring to bet on fixed odds markets. Other Revenue Movements Other significant revenue movements include a ($1m) reduction in Government grant income and a $3.7m increase in sponsored prizemoney income. TBP.001.027.1769

FINANCIAL PERFORMANCE RACING QUEENSLAND ANNUAL REPORT 2015-16 21

Wagering Turnover Summary

QLD Wagering Turnover – All QLD Wagering Turnover – Thoroughbred

QLD Wagering Turnover – Harness QLD Wagering Turnover – Greyhound TBP.001.027.1770

22 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL PERFORMANCE

Racing Queensland Expenditure

Prizemoney

Prizemoney makes up the largest portion of Government support in order to remain a viable Racing Queensland’s expenditure. going concern.

The 2015 annual report disclosed an ($11.2m) Following extensive consultation, Racing operating loss for Racing Queensland as parent Queensland released Tracking Towards entity of the consolidated group. At this time, Racing Sustainability (TTS) Plan on December 3, 2015. Queensland had delivered five years of operating losses, had no cash reserves to fund ongoing losses The TTS Plan introduced an amendment to and had budgeted a loss of ($28m) for 2015-16. prizemoney levels from April 1, 2016. Importantly, the revised prizemoney levels remain higher than The State Government agreed to fund Racing those in place before the prizemoney increases Queensland’s operational cash shortfalls as Racing Queensland embarked on developing a future implemented on October 1, 2014. sustainability process, on the basis that such funds will As part of the TTS, a mechanism has been put be repaid when Racing Queensland is financially able. in place that allows prizemoney to be reviewed In addition, the Queensland Audit Office noted on a quarterly basis, taking into consideration as part of its assessment of the 2015-16 Annual the profitability of the industry overall and the Financial Statements, that RQ requires ongoing profitability of each code.

Racing Queensland Contribution to Prizemoney and Breeding Schemes

code 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 $M $M $M $M $M $M Thoroughbred $ 76.4 $ 78.5 $ 81.2 $ 84.0 $ 93.5 $ 98.5 Harness $ 14.2 $ 14.2 $ 14.9 $ 14.2 $ 16.5 $ 16.6 Greyhound $ 7.9 $ 9.6 $ 10.4 $ 10.8 $ 14.7 $ 14.0 Total $ 98.5 $ 102.3 $ 106.5 $ 109.0 $ 124.7 $ 129.1

Industry Infrastructure Strategy Summary

The following table outlines Racing Queensland and the State Government’s investment in key projects under the infrastructure strategy.

Actual Funds received project from Government costs for for the life of the life Approval the project to of the per 30/06/16 (including project to funding Project interest earned) 30/06/16 deed % Complete Cronulla Park, Logan 1,479,271 1,479,271 12,000,000 on hold Eagle Farm Track, Brisbane 9,268,187 9,271,187 10,000,000 92.7% Cluden Park, Townsville 6,942,436 6,920,084 7,000,000 98.9% Eagle Farm Infield, Brisbane 12,118,907 11,914,949 12,000,000 99.3% TOTAL 29,808,802 29,585,491 41,000,000 TBP.001.027.1771

FINANCIAL PERFORMANCE RACING QUEENSLAND ANNUAL REPORT 2015-16 23

Three Codes’ Individual Performances

As parent of the consolidated group, Racing The table below shows that: Queensland’s overall loss increased by ($8.7m) to • Greyhound racing delivered a better than break ($19.9m) in the 2015-16 financial year, with overall even position in delivering a profit of $0.3m in revenue increasing by $5.2m and expenditure 2015-16. increasing by $13.9m on the previous year. • Thoroughbred racing generated a loss of The overall revenue increase of $5.2m was mainly ($12.4m) in 2015-16, which was approximately due to increased sponsored prizemoney and 7.2% of its revenue. wagering revenue. • Harness racing had a loss of ($7.8m) in 2015-16, which was approximately 34 per cent of its revenue.

For the period 1 July 2015 to 30 June 2015

RACING THOROUGHBRED HARNESS GREYHOUND QUEENSLAND

$’000 $’000 $’000 $’000

Total Revenue 229,229 172,844 22,662 33,723

Total Expenditure 247,124 184,129 30,148 32,847

Earnings / (Loss) Before Depreciation (-17,895) (-11,285) (-7,486) 876

Depreciation 2,023 1,120 338 565

Profit / (Loss) for the Year (-19,918) (-12,405) (-7,824) 311 TBP.001.027.1772

24 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL PERFORMANCE

Three Codes Snapshot

RACING ACTIVITY 2011-12 2012-13 2013-14 2014-15 2015-16

Number of Meetings Thoroughbreds TAB 438 443 440 406 417 Non TAB 274 281 290 282 269 ALL 712 724 730 688 686 Harness TAB 257 289 314 270 262 Non TAB 50 20 15 13 17 ALL 307 309 329 283 279 Greyhounds TAB 407 409 443 457 464 Non TAB 119 133 138 108 112 ALL 526 542 581 565 576

RACING ACTIVITY 2011-12 2012-13 2013-14 2014-15 2015-16

Number of Races Thoroughbreds TAB 3,182 3,272 3,343 3,040 3,110 Non TAB 1,384 1,468 1,458 1,461 1,401 All 4,566 4,740 4,801 4,501 4,511 Harness TAB 2,030 2,270 2,454 2,339 2,229 Non TAB 254 106 72 68 78 All 2,284 2,376 2,526 2,407 2,307 Greyhounds TAB 4,063 4,117 4,429 4,534 4,717 Non TAB 930 1,011 1,046 826 796 All 4,993 5,128 5,475 5,360 5,513

RACING ACTIVITY 2011-12 2012-13 2013-14 2014-15 2015-16

Number of Starters Thoroughbreds TAB 32,148 34,632 31,906 30,230 30,758 Non TAB 11,336 11,196 11,787 11,726 11,436 All 43,484 45,828 43,693 41,956 42,194 Harness TAB 19,164 21,450 22,153 21,403 21,433 Non TAB 2,199 856 550 547 593 All 21,363 22,306 22,703 21,950 22,026 Greyhounds TAB 31,515 31,667 33,849 35,297 36,565 Non TAB 6,271 7,084 7,368 6,170 5,718 All 37,786 38,751 41,217 41,467 42,283

RACING ACTIVITY 2011-12 2012-13 2013-14 2014-15 2015-16

Wagering Turnover Thoroughbreds TOTAL QLD $ 2,341,467,988 $ 2,363,007,440 $ 2,384,717,252 $ 2,234,212,293 $ 2,459,312,570 Harness TOTAL QLD $ 303,544,797 $ 353,666,296 $ 410,018,633 $ 438,912,308 $ 451,880,793 Greyhounds TOTAL QLD $ 397,010,148 $ 452,605,059 $ 537,998,497 $ 564,256,476 $ 631,594,032 TBP.001.027.1773 TBP.001.027.1774

26 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL PERFORMANCE

Country Racing Contribution

Racing Queensland Country Racing Contribution

RACING QUEENSLAND 2015-16

Product and Program Fee $ 129,829,841

Race Information Fees deducted by UBET ($ 31,478,647)

Net Product and Program fee paid to Racing Queensland $ 98,351,194

5.32% of Net UBET Product Fee as Prizemoney Obligation under the Act $ 5,232,284

Prizemoney paid excluding value add prizemoney by the clubs $ 9,458,407

QTIS Paid $ 668,150

Total Prizemoney paid includes QTIS and excluding value add prizemoney $ 10,126,557

Additional prizemoney paid by RQ over and above the 5.32% under the Act $ 4,894,273

STATE OF QUEENSLAND COUNTRY RACING SERIES FUNDING CONTRIBUTION $ 973,531

In addition, Racing Queensland also assists to facilitate race meetings at non-TAB venues by funding a range of club subsidy payments, jockey riding fees etc. TBP.001.027.1775

FINANCIAL PERFORMANCE RACING QUEENSLAND ANNUAL REPORT 2015-16 27

Training Track Subsidy

In 2015-16, the State Government provided funding • A threshold component of $1.2m paid directly of $2m under the Thoroughbred Code Training by the State Government to race clubs in Track Subsidy Scheme, which is distributed to race accordance with the quality and extent of training facilities provided by the club; and clubs that provide much needed training facilities for the industry. • An incentive component consisting of $800,000 distributed by Racing Queensland in accordance Funding under this scheme is separated into two with a formula recognising the number of starters components: produced annually by individual race clubs.

Training Track Subsidy Paid – TAB and Non-TAB Clubs

The graphs below highlight the distribution of starters between TAB and non- TAB clubs that receive the training track subsidy. The total number of starters between TAB and non-TAB meetings is also shown below for comparison.

Training Track Starters 2015-16 Racing Starters 2015-16 TBP.001.027.1776

28 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL PERFORMANCE

Industry Licensing

The following tables outline the number of licences issued as at June 30, 2016:

CATEGORY NUMBER

THOROUGHBRED

Total Trainers 918

Total Jockeys 260

Total Stable Staff 2,743

Bookmakers 91

Bookmakers Clerks 441

Riders Agents 31

Total Visiting Licenses 299

Total Thoroughbred 4,783

HARNESS

Total Trainer/Drivers 182

Total Drivers 31

Total Trainers 115

Total Stable hands 159

Total Harness 487

GREYHOUND

Total Trainers 687

Attendants 357

*Breeders License 355

Stud masters 34

Track Operators 7

Total Greyhound 1,440

Total 132 Licensed Clubs

Thoroughbred Harness Greyhound Total

TAB 13 2 4 19

NON TAB 107 3 3 113

Total 120 5 7 132 TBP.001.027.1777

FINANCIAL PERFORMANCE RACING QUEENSLAND ANNUAL REPORT 2015-16 29

Objectives and Key Performance Indicators

The following Key Performance Indicator (KPIs) areas are contained in the Racing Queensland Strategic Plan 2014-17. In 2015-16, Racing Queensland’s performance against the KPIs has to some extent been influenced by the release and implementation of the TTS in December 2015.

Organisational KPIs will be reviewed as Racing Queensland works towards releasing a new Strategic Plan in 2016-17. However, the following table summarises Racing Queensland’s performance against specific KPIs outlined in the existing plan.

Objective area KPIs Result Comment 2015-16 2015-16 Grow Wagering Revenue $m $158,1m $151,7m Includes revenue from UBET and Wagering Service Providers and is provided in this context exclusive of race information fee deductions, the UBET fixed fee, product rebates and income from UBET sports retail. Increase Breeding 2,547 Data not available at time of production Registrations Increase Prizemoney $m $111.1m $137.9m Includes prizemoney and breeders’ bonus payments. Prizemoney levels were reduced from April 1, 2016. Increase Integrity Tests 16,974 17,446 Racing Queensland exceeded the KPI in further proof of its ongoing commitment to uphold the integrity of racing across the three codes. Of all tests only 0.52% returned positive results. Integrity Costs of Total 6.39% 5.65% Prizemoney levels have increased Expenditure significantly since KPIs were established, impacting integrity costs as a portion of overall Racing Queensland expenditure. Increase Number of Starters 118,753 106,503 The number of starters is consistent with the number of starters in previous years. Grow Attendance 771,750 Attendances for FY15-16 were not available at the time of print as club annual reports are not due until September 30, 2016. Increase Total Number 2,872 1,902 The number of trainers is consistent with of Trainers the number of trainers at the same point in time in 2014-15. The 2015-16 figure will increase as registration periods close. Increase Total Licensees 7,140 6,710 The number of total licensees decreased slightly from the 6,932 licensees recorded in 2014-15. Grow Total Number of Owners 18,685 Data not available at time of production Increase Total Number of * Unable to quantify. Participants Improve Turnover of Total * Unable to quantify. Participants Improve Voluntary Employee <5% 13.67% Staff turnover rate almost halved in Turnover Rate 2015-16 from 24% the previous year.

* This KPI is listed in the Racing Queensland Strategic Plan 2014-17 but is unable to be measured under existing conditions. The data source from which the KPI was created is unknown. TBP.001.027.1778

30 RACING QUEENSLAND ANNUAL REPORT 2015-16 THE ORGANISATION

Board and Management

Racing Queensland Board

On May 1, 2013, Racing Queensland was Queensland to be deficient in that it did not established as the new control body for adequately assess risk and failed to plan an overall Greyhound, Harness and Thoroughbred racing strategy to deal with the risk to integrity and in Queensland. As part of the new governance animal welfare across all three codes of racing. arrangements for racing in Queensland, control boards for each code of racing were also All members of the Board of Racing Queensland established on May 1, 2013. and of the boards of each of the three racing codes were removed and the Honorable John Muir Racing Queensland and the control boards QC was appointed Interim Chairman of the Board collectively oversee the strategic direction of of Racing Queensland on June 4, 2015. racing for all codes in Queensland. On March 30, John Muir’s term concluded and On March 2, 2015, the Minister for Agriculture and on April 1, Steve Wilson AM was appointed as the Fisheries, Sport and Racing initiated a systems review of the regulation of the Greyhound Racing Independent Chairperson of the Queensland All Industry and that review was followed by the Codes Racing Industry Board. establishment of a Commission of Inquiry into the At the same time, three industry members Queensland Greyhound Racing Industry. representing each code were also appointed; On June 1, 2015, Commissioner Alan MacSporran Dale Cartwright, Marg Reynolds and Jim Rundle QC, found the regulatory framework of Racing (resigned on April 4).

Racing Queensland Board

NAME POSITION BOARD TERM

The Hon. John Muir QC Chairperson Queensland All Codes July 1 2015 – March 30 2016 Racing Industry Board

Steve Wilson AM Chairperson Queensland All Codes April 1 2016 – June 30 2016 Racing Industry Board

Dale Cartwright Member Queensland All Codes April 1 2016 – June 30 2016 Racing Industry Board

Margaret Reynolds Member Queensland All Codes April 1 2016 – June 30 2016 Racing Industry Board

Jim Rundle Member Queensland All Codes April 1 2016 – April 4 2016 Racing Industry Board TBP.001.027.1779 TBP.001.027.1780

32 RACING QUEENSLAND ANNUAL REPORT 2015-16 THE ORGANISATION

Board Appointments – Racing Queensland

The Honorable John Muir John Muir retired as a judge of the John has served as; chairman of the He was awarded the Centenary Medal Queensland Court of Appeal on December Queensland Law Reform Commission; in 2003 and is a Fellow of the Institute 26, 2014. He was appointed to the Court in president of the Land Appeal Court; of Arbitrators and Mediators Australia. July 2007 after serving as a trial division chairman of the Committee of the Bar Between 2007 and 2014, he was the Judge from April 1997. For the five years prior Practice Centre and chairman of the Rules secretary of the judicial section of Law Asia, to his appointment to the Court of Appeal, he Committee constituted under the Supreme and secretary of the biennial conferences of was the senior commercial list judge. Court of Queensland Act 1991. Chief Justices of Asia and the Pacific.

Independent Chair – Industry member – Industry member – Steve Wilson AM Margaret Reynolds Dale Cartwright

Steve is the former chief executive officer Margaret was the secretary/treasurer of Dale is the past president of the Brisbane and chairman of Wilson Group Ltd, one the Queensland Breeders Owners Trainers Greyhound Racing Club and was a committee of Australia’s leading funds management Reinspersons Association. She is a former member for six years. He is the past vice- and stockbroking firms. He has honorary director of the Queensland Harness Racing president of the Brisbane Greyhound Racing doctorates of philosophy and was awarded Board and was also secretary/manager of Club and has been involved in Greyhound an AM in 2011 for services to the financial North Qld Harness Racing Club. racing for more than 30 years. Dale chaired services sector and the community. the meetings of the Queensland Greyhound With extensive business and corporate Affiliation which dealt with industry and governance experience, he has served welfare issues in 2015. as Chairman of Southbank Corporation, Hyperion Asset Management, Queensland Rugby Union, St John’s Cathedral Completion Fund and on the boards of Telstra and Queensland Tourism. TBP.001.027.1781

THE ORGANISATION RACING QUEENSLAND ANNUAL REPORT 2015-16 33

On July 1, 2016, the following Board members were appointed:

Independent member and country NSW and now has an involvement Broad are both previous chairmen of the Deputy Chair – Sharon Dawson in more than 25 thoroughbreds. He has a Brisbane Amateur Turf Club. deep understanding of all aspects of the Sharon is the chief executive officer of thoroughbred industry and an ongoing Independent member – the Dawsons Group, a diversified heavy interest and passion for the industry, its Max Walters OAM FCA engineering and services company with participants and its future. operations in Cairns, Townsville and Charters Max was a senior executive with the Seven Towers. She is also a former member of the Independent member – Network for 26 years and is a lifelong Advisory Committee for TAFE North and Susannah George follower of racing across all codes. Max’s previously sat on the management committee initial background is finance and he is for Advance Cairns. Sharon has a strong Susannah is the founder and director of a Fellow of the Institute of Chartered knowledge of country and regional racing. The Urban List, one of Australia’s fastest- Accountants. During his career, he has been growing and most influential digital lifestyle responsible for highly successful marketing, Industry member – Mark Sowerby platforms, attracting an audience of more promotional and broadcast agreements than 1.6 million readers per month. As a great between the Seven Network and both Mark is the founder and managing director Brisbane success story, The Urban List began the South Australian Jockey Club and the of Blue Sky Alternative Investments Ltd, an in Queensland and now operates in Sydney, Brisbane Racing Club. Max was awarded the alternative asset manager. In March 2016, Melbourne, Perth and Auckland. Susannah Order of Australia Medal in 2011 for services Blue Sky was admitted to the ASX index as was named “Woman of the Year” in the B&T to cricket, the community and the media. one of Australia’s top 300 listed companies Women in Media Awards in 2015 and won the with a market capitalisation in excess of digital category for her work with The Urban $500m and 85 people across offices in List. Susannah has familial connections with Brisbane, Sydney, Melbourne, Adelaide the racing industry - her great grandfather and New York. Mark raced horses across Daniel O’Mara and grandfather Judge Eddie

RACING QUEENSLAND STRUCTURE as at June 30, 2016

QUEENSLAND ALL CODES INDUSTRY RACING BOARD

Chief Executive Officer

Stewarding and EDUCATION AND Operations CORPORATE JOCKEY AND FINANCE HUMAN RESOURCES AUDIT, RISK, AND Integrity Operations AND STRATEGY DRIVER WELFARE COMPLIANCE

Racing Operations Jockey and Driver stewarding Infrastructure Projects Internal Audit – Thoroughbred Operations Welfare (Thoroughbred Greyhound Registered Training Governance, Risk Racing Operations Legal Services – Harness Harness) Organisations and Compliance

Racing Operations – Greyhound Integrity Regulation Marketing and Communications (including Wagering) Club Liaison and Licensing and Development Registrations (including Workplace Health and Safety) Animal Welfare Facility Maintenance

Raceday Operations Information Technology TBP.001.027.1782

34 RACING QUEENSLAND ANNUAL REPORT 2015-16 THE ORGANISATION

Our People

In 2015-16, Racing Queensland employees (excluding board members) and 114 casual continued to professionally deliver services and employees across 142 FTE permanent positions and implement new initiatives to support the racing 15 temporary positions. The separation rate was 13.7 industry across the Thoroughbred, Harness and per cent compared to 23.9 per cent for 2014-15. Greyhound codes. • Flexible working arrangements were in place Racing Queensland employs a range of people on June 30, 2016, for 12 permanent employees with diverse experience in a number of industry working part-time and three employees specific roles including: stipendiary stewards, participating in formal telecommuting handicappers, graders, veterinarians, sample arrangements. Other employees work adjusted collection officers, licensing and registration start and finish times either formally or on an officers, facility maintenance and development ad hoc basis. officers, animal welfare staff, workplace educators, jockey mentors, wagering and data During 2015-16, Racing Queensland analysts, infrastructure projects staff and club acknowledged the following recognition of liaison and development officers. service rewards:

These roles are supported by corporate functions • 5 years’ service – 8 employees including: legal, audit, risk and compliance, • 10 years’ service – 10 employees marketing and communications, information • 20 years’ service – 1 employee technology, finance and human resources. All employees are employed under individual We continued to provide health and wellbeing employment agreements. services including:

• Racing Queensland implemented an • Monthly information sheets and website links organisational structure realignment to assist on the Employee Assistance Program and with workforce planning. Vacant positions topics such as: mental health (goal setting, that cannot be filled internally are advertised stress, anxiety, depression, understanding externally to attract candidates from an suicide, domestic and family violence); inclusive, diverse and capable workforce. The physical health (nutrition and exercise); performance management system was updated financial health (surviving the holidays, but not implemented due to the delayed budgeting and responsible credit); and creation of the Queensland Racing Integrity promoting the GreatLife app focusing on mind, Commission commencing July 1, 2016. body, money, relationships, work and family • All new employees attend a corporate • Influenza vaccinations provided to induction on their first day covering the 34 employees Code of Conduct, general Racing Queensland • Linking to QSuper financial fitness program policies and procedures, as well as human • Implementing a workstation ergonomic resources and workplace health and safety assessment process and providing equipment systems, and processes. • Appointing a Workplace Health and Safety As at June 30, 2016, Racing Queensland employed adviser to focus on the commencement of 122 full-time equivalent (FTE) permanent developing and updating all workplace health employees, 24 fixed-term contract employees and safety-related documentation and practices. TBP.001.027.1783

THE ORGANISATION RACING QUEENSLAND ANNUAL REPORT 2015-16 35

Executive Leadership Team

Acting Chief Executive Officer – Head of Audit, Risk and Compliance – Samuel Adams Michael Campbell

Sam was the acting chief executive officer from Michael leads the audit, risk and compliance April 1, 2016 to August 21, 2016. Between July 1, department created in January 2016 to conduct 2016 and March 31, 2016, Sam’s role as head of internal audits and investigations, manage club corporate and strategy was to lead the organisation’s compliance, undertake a legislative compliance legal, infrastructure, wagering, marketing and review, implement the risk management system, communications functions. control track, and commence the review of the procurement function and the review of Head of Operations – organisational policies and procedures. Declan Martschinke General Counsel – Allan Lonergan Declan leads the racing operations department, which works with clubs across the three codes of Allan commenced with Racing Queensland racing to develop the most innovative and effective in November 2015 and is responsible for legal allocation of race dates, scheduling prizemoney, services including; litigation matters, requests for developing state-wide racing programs and information, land resumption matters, contract feature race schedules. His other responsibilities management and providing specialist legal advice include; developing and implementing the Tracking across all areas of the business. Towards Sustainability Plan, consulting with industry discussion groups, the provision of handicapping Education Manager – Robyn Bell and grading services, club liaison and development, facility maintenance, creating business intelligence Robyn commenced with Racing Queensland in reporting, rolling out new information technology March 2016 and is responsible for managing a team infrastructure and moving to the Single National of workplace educators and apprentice coaches System – Thoroughbred. aligned to the registered training organisation and implement the jockey and driver welfare function. Acting Head of Stewarding and Robyn has more than 12 years’ experience within Operations – James Dart the vocational education and training sector and brings with her a wealth of knowledge in contract Jamie leads the Stewarding and Integrity Department compliance, program development and community to conduct inquiries, undertake stable and kennel and industry capacity building. inspections, provide veterinary services, introduce a focused animal welfare function, implement the Finance Manager – Sharon Drew Greyhound Adoption Program and manage race day operations. Jamie also led the department to identify Sharon leads the finance department to provide the functions to be transferred to the Queensland accounts payable and receivable, prizemoney Racing Integrity Commission and the implementation distribution, management accounting and reporting of the change management process for staff and and ensuring financial compliance and audit industry participants. requirements are met.

Acting Head of Corporate and Human Resources Manager – Strategy – Doug Cross Erica Urselmann

Doug was responsible for managing the Corporate Erica leads the human resources department to and Strategy team from April 2016 to August 2016. deliver payroll services, recruitment and selection, Prior to this, his position was that of general manager workforce reporting, performance management and marketing and communications. employee and industrial relations matters. TBP.001.027.1784

36 RACING QUEENSLAND ANNUAL REPORT 2015-16 CORPORATE GOVERNANCE

Corporate Governance

The governance structure of Racing Queensland topics during their induction. The finalisation of has been established to set direction and oversee the updated Code of Conduct and retraining for all performance. Information about strategic and employees has been identified as a focus for 2016-17. operational performance is provided by Racing Queensland’s performance reporting, human Racing Queensland’s governance groups and resource and financial systems. Strategic and committees oversee all major activities and areas of operational direction is communicated and managed decision-making and ensure the organisation has through Racing Queensland’s Business Plan, quarterly a clear direction, operates efficiently and fulfills its plans, key performance measures and targets as well legislative responsibilities. These groups are: as a structured risk management process. • Executive Leadership Team • Audit and Risk Committee Compliance • Workplace Health & Safety Committee The Queensland All Codes Racing Industry • Licensing Committee Board (trading as Racing Queensland) was established under s9AA of the Racing Act 2002. • Remuneration Committee Racing Queensland is a statutory body under the Financial Accountability Act 2009 and Statutory Executive Leadership Team Bodies Financial Arrangements Act 1982 and a The executive leadership team oversees the unit of public administration under the Crime and organisation’s strategic direction and performance. Misconduct Act 2001. The group is assisted by the audit and risk committee and other governance groups. The executive Governance leadership teams’ role is to:

Each accountable officer and statutory body must • Administer the rules of racing ensure a governance framework appropriate for the • Implement sound policies accountable officer’s department or the statutory body is established. Governance, for a statutory • Establish and maintain standards of safety body, is the way the statutory body manages the and integrity performance of its functions and operations. • License industry participants • License race clubs, venues and monitor their Racing Queensland’s Governance incorporates the activities and performance cultural and operational aspects of our organisation that are influenced by our actions and decisions and • Monitor the condition of racecourses and work includes the concepts of: with race clubs to ensure courses are developed to a suitable standard (i) Openness, integrity and accountability • Commission and undertake research and (ii) Due care promotional activities (iii) Public defensibility • Administer industry funding and commercial agreements Racing Queensland commenced updating the Code • Represent the Queensland racing industry on of Conduct to reflect the Queensland Public Service the three peak national bodies; the Australian Code of Conduct and aligns to the Public Sector Racing Board (ARB) and its subcommittees, Ethics Act 1994 principles, values and the obligations Harness Racing Australia (HRA) and Greyhounds of public officials. This is supported by a separate Australasia Limited (GAL) policy focusing on actual or perceived conflicts of interest related to the racing industry that is required • Develop an effective product and program mix to be completed as part of the pre-employment • Provide an effective and efficient system for the check. All new employees receive training on these distribution of prizemoney TBP.001.027.1785

CORPORATE GOVERNANCE RACING QUEENSLAND ANNUAL REPORT 2015-16 37

Direction from the Minister

In accordance with the Racing Act 2002 (the • Direction from the Hon. Grace Grace MP, – Advises the director-general, NPSR and Racing Act), Racing Queensland received the Minister for Employment and Industrial the commissioner, as soon as possible, following ministerial directions: Relations, Minister for Sport and Minister for of any issues that arise related to the Multicultural Affairs on March 16, 2016 that national bodies that could impede • Direction from Hon. Steve Dickson, Racing Queensland facilitates the following: the effective operation of the racing Minister for National Parks, Recreation, industry following the implementation Sport and Racing (NPRS) on July 18, 2013, – The obtaining of advice from the of the reforms requiring the Queensland All Codes Racing Commissioner in the evaluation of Industry Board to seek approval from the Racing Queensland’s finances, assets – Advises how Racing Queensland Minister prior to: and systems by allowing access to all proposes to resolve any of those issues necessary information ­– Paying any account, debt or other • Direction from Hon. Grace Grace MP, payment, however described, ­– The preparation for transfer of officer Minister for Employment and Industrial exceeding $1m from Racing Queensland to Queensland Relations, Minister for Sport and Minister – Entering into any legally binding Racing Integrity Commission (QRIC) by for Multicultural Affairs on May 24, 2016, agreement where consideration may providing access to all personnel files subsequent to ministerial direction of March exceed $1m for any individual agreement and information, which may include 16, 2016, requiring RQ provide Racing but is not limited to names, addresses, Queensland’s accounts payable master data – Entering into more than one agreement bank details, remuneration packages, to the department. The data should include: with the same entity or a related body to superannuation, employment conditions that entity, where the agreements are for and historical personnel files – all relevant employee and trading substantially the same matters, where vendor master data records as the consideration for the totality of such – The transfer of resources from Racing required by the department to ensure agreements may exceed $1m Queensland (once identified) to QRIC, the QRIC required accounts payable which will include staff, positions, functionality is built into its new This above direction does not apply to: funding, assets and or supporting financial management system ready for systems and tools related to the operation from July 1, 2016. – The payment of prizemoney published functions of QRIC in the racing calendar by Racing Queensland or – Following the implementation of Recommendation 1 of the Queensland ­– The payment of recurring salaries and wages of employees of Racing Greyhound Racing Industry Commission Queensland, or superannuation and tax of Inquiry (the Commission) through payments associated with such recurring the establishment of and transfer of salaries and wages functions to QRIC, the minister also requested that Racing Queensland: • Direction from Hon. Bill Byrne MP, Minister for Agriculture and Fisheries and Minister – Informs the national bodies, in writing, for Sport and Racing, on March 16, 2015 about the current reforms being confirming the above direction is still in effect implemented in Queensland and the and will continue until otherwise advised impact that these reforms will have on Racing Queensland’s ability to • Direction from Hon. Grace Grace MP, Minister comply with the requirements of the for Employment and Industrial Relations, national bodies Minister for Sport and Minister for Multicultural Affairs on December 21, 2015, – Takes carriage for the resolution of any confirming the direction issued July 18, issues arising from the implementation 2013, is still in effect and will continue until of the reforms in Queensland raised by otherwise advised the national bodies TBP.001.027.1786

38 RACING QUEENSLAND ANNUAL REPORT 2015-16 CORPORATE GOVERNANCE

Audit and Risk Committee

As a result of the structure of the board full board having been appointed on July 1, throughout the 2015-16 financial year, no audit 2016, an audit and risk committee has been and risk committee was established. With the established. Internal Audit

Internal audit is an integral part of Racing Internal audit has also paid due regard to Queensland’s corporate governance framework, Queensland Treasury’s audit committee guidelines established to provide an independent appraisal and in performing its function, with a view to advisory function to the chief executive officer and improving accountability and performance. the Queensland All Codes Racing Industry Board. Internal audit worked to the three-year Internal Responsibilities also include; providing assessment Audit Plan, containing the 2015-16 annual and evaluation of the effectiveness and efficiency Internal Audit Plan, approved by the audit and of financial and operating systems, compliance risk committee. A risk-based approach was and reporting processes and activities. The applied in developing the annual audit plan, while internal auditor retains an independent and direct maintaining an appropriate balance of review of reporting relationship to the board. core business processes. Internal audit operates under an internal audit Internal audit reported on the outcome of audits charter which defines the purpose, responsibilities undertaken, progress in relation to the annual plan and function of the Audit. The charter was and the implementation of audit recommendations. developed, as required by the Financial and The most significant work reported on in the 2015- Performance Management Standard 2009, and 16 financial year was in the following areas: is consistent with accepted auditing and ethical standards, including the International Professional • Race club governance, operations and Practices Framework approved by the Institute of management Internal Auditors and the Auditing and Assurance • Race information fees Standards Board. • SKY Channel licence fees

General Information Open Data Initiative Information Systems and Recordkeeping

In line with the Queensland Government’s open data Racing Queensland has previously worked initiative, Racing Queensland has developed an open with the state archivist with a view to finalising data policy and publishes a wide range of data on its retention and disposal schedule. Racing the web which may be available to interested parties Queensland will continue to work with the state as part of this initiative. Information available online archivist to adapt the current schedule to apply to includes Racing Queensland’s overseas travel and all racing agencies and put in place retention and disposal schedules covering the entire industry. consultancy information. Racing Queensland continues to review its record keeping with a view to establishing best practice and to better facilitate compliance with the Public Records Act 2002, Information Privacy Act 2009, and Right to Information Act 2009. TBP.001.027.1787

GLOSSARY RACING QUEENSLAND ANNUAL REPORT 2015-16 39

Glossary of Terms

Glossary of terms which may have been used in this report are contained in the table below:

Term Definition Board The board of Racing Queensland Breeding Incentive Scheme A scheme that provides an incentive for Queensland-bred race animals to be purchased and raced in Queensland through the provision of bonus prizemoney Chairman of Stewards The most senior steward position responsible for management and oversight of integrity services and stewarding Code The type of racing, being one of the following; Thoroughbred Racing, Harness Racing or Greyhound Racing Control Body An organisation that exists for the purpose of controlling racing for a particular code or codes empowered by the Racing Act Country Areas outside of metropolitan and provincial. Generally country areas Customers Individuals, groups or organisations with specific interest in and/or influence on the work of Racing Queensland Group 1, 2, and 3 A level of quality in terms of performance and prizemoney ascribed to a particular race as set by the Australian pattern committee. Group 1 is the highest level Integrity The standards and required behaviours applied to the conduct of races, the rules associated with racing and the resulting confidence, all things being equal, by the public in a fair and equitable race outcome Metropolitan Racing The greater Brisbane area. Specifically the venue held by the Brisbane Racing Club Off-course Activities conducted outside of a race course venue On-course Activities conducted at a race course venue Pacing or pace Used to describe the particular style of Harness racing in reference to the horses’ gait Pari-mutuel Traditional wagering market with floating (variable) odds based on a total market pool of funds wagered Principal Racing Authority A state-based organisation that exists for the purpose of managing and administering racing for a particular code or codes Prizemoney Funds collected by Racing Queensland through the product and program agreement and race information fees and distributed to owners, trainers, riders, and drivers as a result of winning or placing their animal in a race Product and Program The racing product being the participation composition and broadcast race event and the program being the scheduling of that product Product and Program Agreement The revenue from wagering distribution agreement between Racing Queensland and Tattsbet Provincial Major regional cities as designated by Racing Queensland QBRED A Harness racing breeding scheme Race club A not for profit association appointed by its members for the purpose of running race meetings at a particular venue Race Information Fees The fee charged by Racing Queensland for the use of product and program for the purposes of wagering Rules of Racing The rules relating to the participation in and conduct of a particular code of racing as formulated, published and enforced by the control body Stakeholders Individuals, groups or organisations with specific interest in and/or influence on the work of Racing Queensland Speed map A tool to assist in analysing the way a race is likely to be run in terms of speed, positioning and use of any track bias that may be present Swab Official Race day operations employee that performs the duties of swabbing racing animals Synthetic Track A race track surface constructed of synthetic material (as opposed to grass) TAB Meeting Product and program broadcast on television and radio and wagered on through any wagering operator Trotting or Trot Used to describe the particular style of Harness racing in reference to the horses’ gait Wagering Gambling on code-specific product and program TBP.001.027.1788

40 RACING QUEENSLAND ANNUAL REPORT 2015-16 ACRONYMS

ACRONYMS

Acronyms which may have been used in this report are contained in the table below:

Acronym Description

2YO 2-Year-Old in relation to a horses age

3YO 3-Year-Old in relation to a horses age

4YO 4-Year-Old in relation to a horses age

ARB Australian Racing Board

C.A.R.E. Collaborate, Assist, Regulate, and Enable

CCS Clubs Cooperation Scheme

CEO Chief Executive Officer

GAL Greyhounds Australasia Limited

GAP Greyhound Adoption Program

HR Human Resources

HRA Harness Racing Australia

IIS Industry Infrastructure Strategy

IP Intellectual Property

IT Information Technology

NDR National Data Repository

PRA Principal Racing Authority

QCAT Queensland Civil and Administrative Tribunal

QCRS Queensland Community Racing Scheme

QREA Queensland Racing and Equine Academy

QRI Queensland Race Information

QRIC Queensland Racing Integrity Commission

QTIS Queensland Thoroughbred Incentive Scheme

RISA Racing Information Services Australia

RISE Racing Information Services Enterprise

RQ Racing Queensland

RWWA Race Wagering Western Australia

SCIT Sunshine Coast Institute of TAFE

TCO2 Total carbon concentration level

TTS Tracking Towards Sustainability Plan TBP.001.027.1789

BOARD MEETINGS RACING QUEENSLAND ANNUAL REPORT 2015-16 41

BOARD MEETINGS

Name of Government body Queensland All-Codes Racing Industry Board

Act or instrument Racing Act 2002

Functions The Queensland All-Codes Racing Industry Board (the All-Codes Board) (trading as Racing Queensland) was established under s.9AA of the Racing Act 2002. Racing Queensland is a statutory body under the Financial Accountability Act 2009 and the Statutory Bodies Financial Arrangements Act 1982 and a unit of public administration under the Crime and Misconduct Act 2001. The All-Codes Board is the control body for all three codes of racing (Thoroughbred, Harness, and Greyhound) in Queensland and coordinates, manages and regulates the industry by: • administering the rules of racing • implementing sound policies • establishing and maintaining standards of safety and integrity • licensing industry participants • licensing race clubs and venues, monitoring their activities and performance • monitoring the condition of racecourses and working with race clubs to ensure courses are developed to a suitable standard • commissioning and undertaking research and promotional activities • administering industry funding and commercial agreements • representing the Queensland racing industry on the three peak national bodies; Racing Australia and its subcommittees, Harness Racing Australia (HRA) and Greyhounds Australasia Limited (GAL) • developing an effective product and program mix • providing an effective and efficient system for the distribution of prize money • maintaining a capital works program across the codes of racing. The role of the All-Codes Board is to provide strategic guidance for the All-Codes and effective oversight of management. In performing its role, the All-Codes Board aspires to excellence in governance standards.

Achievements • Delivered a better than budgeted financial result • Greyhound racing reform • Establishment and separation of QRIC • Delivery of the TTS Plan • Opening of upgraded Eagle Farm and Townsville Racecourses • Reintroduction of Tuesday uacing in Queensland • Introduction of new marketing partnerships with UBET

Financial reporting The All-Codes Board tables its own Annual Report in Parliament.

Remuneration

Position Name Meetings/sessions Approved annual, Approved sub- Actual fees attendance sessional or daily committee fees if received fee applicable

Chair John Muir QC 30 58,685.00 Nil 48,302.21

Chair Steve Wilson AM 3 58,685.00 Nil 14,671.26

Member Dale Cartwright 3 39,303.00 Nil 9,825.75

Member Margaret Reynolds 3 39,303.00 Nil 9,825.75

Member Jim Rundle 0 39,303.00 Nil 302.32

No. scheduled meetings/sessions 33

Total out of pocket expenses $ 6,395.81 TBP.001.027.1790

42 RACING QUEENSLAND ANNUAL REPORT 2015-16 COMPLIANCE CHECKLIST

ATTACHMENT B - compliance checklist

Summary BASIS FOR Annual report of requirement REQUIREMENT reference

Letter of compliance A letter of compliance from the accountable ARRs – section 8 Inside Cover officer or statutory body to the relevant Minister/s

Accessibility Table of contents ARRs – section 10.1 Pages 1 & 39 Glossary Public availability ARRs – section 10.2 Page 1 Interpreter service statement Queensland Government Language Services Policy N/A ARRs – section 10.3

Copyright notice Copyright Act 1968 Page 1 ARRs – section 10.4

Information licensing QGEA – Information Licensing Page 1 ARRs – section 10.5 General information Introductory information ARRs – section 11.1 Page 2 Agency role and main functions ARRs – section 11.2 Page 2 Operating environment ARRs – section 11.3 Page 9 & 10 Non-financial Government’s objectives for the community ARRs – section 12.1 Page 18 performance Other whole-of-government plans / specific initiatives ARRs – section 12.2 N/A Agency objectives and performance indicators ARRs – section 12.3 Page 29 Agency service areas and service standards ARRs – section 12.4 Page 4 Financial performance Summary of financial performance ARRs – section 13.1 Pages 19 - 28 Governance – Organisational structure ARRs – section 14.1 Pages 32 & 33 management and structure Executive management ARRs – section 14.2 Page 35 Government bodies (statutory bodies and other entities) ARRs – section 14.3 N/A

Public Sector Ethics Act 1994 Public Sector Ethics Act 1994 Page 36 ARRs – section 14.4 Queensland public service values ARRs – section 14.5 Page 3 & 36 Governance – Risk management ARRs – section 15.1 Page 38 risk management and accountability Audit committee ARRs – section 15.2 Page 38 Internal audit ARRs – section 15.3 Page 38 External scrutiny ARRs – section 15.4 N/A Information systems and recordkeeping ARRs – section 15.5 Page 38 Governance – Workforce planning and performance ARRs – section 16.1 Page 34 human resources Early retirement, redundancy and retrenchment Directive No.11/12 Early Retirement, Redundancy and N/A Retrenchment Directive No.16/16 Early Retirement, Redundancy and Retrenchment (from 20 May 2016) ARRs – section 16.2

Open Data Consultancies ARRs – section 17 https://data.qld.gov.au ARRs – section 34.1

Overseas travel ARRs – section 17 https://data.qld.gov.au ARRs – section 34.2

Queensland Language Services Policy ARRs – section 17 https://data.qld.gov.au ARRs – section 34.3 Financial statements Certification of financial statements FAA – section 62 FPMS – sections 42, 43 and 50 Pages 43 - 47 ARRs – section 18.1 Independent auditors report FAA – section 62 FPMS – sections 50 Pages 78 - 79 ARRs – section 18.2

FAA Financial Accountability Act 2009 FPMS Financial and Performance Management Standard 2009 ARRs Annual report requirements for Queensland Government agencies

Annual report requirements for Queensland Government agencies for the 2015-2016 reporting period TBP.001.027.1791

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 43

FINANCIAL STATEMENTS TBP.001.027.1792

44 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 1 TBP.001.027.1793

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 45

RQ Financial Statements year ended June, 30 2016 Page 2 TBP.001.027.1794

46 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 3 TBP.001.027.1795

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 47

RQ Financial Statements year ended June, 30 2016 Page 4 TBP.001.027.1796

48 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 5 TBP.001.027.1797

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 49

RQ Financial Statements year ended June, 30 2016 Page 6 TBP.001.027.1798

50 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 7 TBP.001.027.1799

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 51

RQ Financial Statements year ended June, 30 2016 Page 8 TBP.001.027.1800

52 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 9 TBP.001.027.1801

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 53

RQ Financial Statements year ended June, 30 2016 Page 10 TBP.001.027.1802

54 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 11 TBP.001.027.1803

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 55

RQ Financial Statements year ended June, 30 2016 Page 12 TBP.001.027.1804

56 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 13 TBP.001.027.1805

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 57

RQ Financial Statements year ended June, 30 2016 Page 14 TBP.001.027.1806

58 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 15 TBP.001.027.1807

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 59

RQ Financial Statements year ended June, 30 2016 Page 16 TBP.001.027.1808

60 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 17 TBP.001.027.1809

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 61

RQ Financial Statements year ended June, 30 2016 Page 18 TBP.001.027.1810

62 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 19 TBP.001.027.1811

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 63

RQ Financial Statements year ended June, 30 2016 Page 20 TBP.001.027.1812

64 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 21 TBP.001.027.1813

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 65

RQ Financial Statements year ended June, 30 2016 Page 22 TBP.001.027.1814

66 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 23 TBP.001.027.1815

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 67

RQ Financial Statements year ended June, 30 2016 Page 24 TBP.001.027.1816

68 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 25 TBP.001.027.1817

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 69

RQ Financial Statements year ended June, 30 2016 Page 26 TBP.001.027.1818

70 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 27 TBP.001.027.1819

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 71

RQ Financial Statements year ended June, 30 2016 Page 28 TBP.001.027.1820

72 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 29 TBP.001.027.1821

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 73

RQ Financial Statements year ended June, 30 2016 Page 30 TBP.001.027.1822

74 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 31 TBP.001.027.1823

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 75

RQ Financial Statements year ended June, 30 2016 Page 32 TBP.001.027.1824

76 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 33 TBP.001.027.1825

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 77

RQ Financial Statements year ended June, 30 2016 Page 34 TBP.001.027.1826

78 RACING QUEENSLAND ANNUAL REPORT 2015-16 FINANCIAL STATEMENTS

RQ Financial Statements year ended June 30, 2016 Page 35 TBP.001.027.1827

FINANCIAL STATEMENTS RACING QUEENSLAND ANNUAL REPORT 2015-16 79

RQ Financial Statements year ended June, 30 2016 Page 36 TBP.001.027.1828

80 RACING QUEENSLAND ANNUAL REPORT 2015-16

Follow us on

www.racingqueensland.com.au RQC014 _09/15 TBP.001.031.0001

Size and Scope of Racing in Queensland IER Pty. Ltd.

The racing industry contributes more than $1.44 billion in real gross value added to the Queensland economy. Furthermore, it sustains the full time employment of more than 18,580 individuals. The State Government receives in excess of $103 million in taxes from the racing industry, $35 million of which is derived directly from wagering taxes.

IER Pty Ltd

27A Stubbs Street Kensington Vic 3032

03 9371 3000

03 9371 0695

April 2009 TBP.001.031.0002

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Report to

Queensland Racing Limited (QRL) Harness Racing Queensland (HRQ) Greyhounds Queensland Limited (GQL)

Prepared by

IER Pty. Ltd. 27A Stubbs Street Kensington, Victoria Australia, 3031 ABN: 43 742 335 685

2

TBP.001.031.0003

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

TABLE OF CONTENTS Table of Contents ...... 3 Executive Summary ...... 5 Acknowledgements ...... 8 Disclaimer ...... 9 Introduction ...... 10 Establishing the industry baseline ...... 10 Why undertake this study? ...... 10 Challenges within this study ...... 11 Availability of data ...... 11 Contextualising the size of the Racing Industry ...... 11 Equine Influenza ...... 13 Objectives of the study ...... 14 Scope of the Study ...... 15 Face to Face Interviews ...... 15 Customer Research ...... 15 Participant Research ...... 15 Secondary Research ...... 16 Defining the ‘Racing Industry’ ...... 16 Industry Financial Flow ...... 17 Developing an economic methodology ...... 19 The Participants in Racing ...... 22 Breeding Racing Horses & Greyhounds ...... 24 Current Trends ...... 25 Breeder Motivations ...... 26 Breeders Expenditure ...... 27 Training Horses & Greyhounds ...... 34 Roles Held By Trainers ...... 35 Trainers Motivations ...... 36 Cost of Producing Racehorses and Greyhounds ...... 37 Drivers & Jockeys ...... 43 Ownership in the Queensland Racing Industry ...... 44

3

TBP.001.031.0004

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Ownership Categories and trends ...... 45 Owners Motivations ...... 46 Expenditure by owners ...... 48 Governing Bodies & Racing Clubs in Queensland ...... 51 Returns to Owners ...... 56 Wagering in Queensland ...... 57 The Economic Impact of The Racing Industry in Queensland ...... 59 Economic Impact of Racing ...... 60 Taxation Revenue Generated by Horse Racing in Queensland ...... 62 Employment Sustained by Horse Racing in Queensland ...... 63 Social Importance of Racing ...... 66 Community Building ...... 67 Supporting Family Relationships ...... 68 Education and Training ...... 69 Promoting Healthy environments ...... 69 The Historical Importance of Racing in Queensland ...... 71 Social Impact – Greyhound Adoption Program ...... 72 State Taxation Regimes ...... 73 Queensland ...... 76 New South Wales ...... 78 Victoria ...... 80 South Australia ...... 82 Northern Territory ...... 84 Western Australia ...... 86 Tasmania ...... 88 Taxation Case Study – South Australian Racing Industry ...... 90 Economic Methodology ...... 93

4

TBP.001.031.0005

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

EXECUTIVE SUMMARY

The purpose of this study is to illustrate the Direct Expenditure Breeding Racing Animals by Segment Producing Racing Animals economic value of Thoroughbred, Harness Racing Club & Peak Body Spend ($ million) and Greyhound Racing in Queensland. It Customer Spend (Off Course) provides a detailed analysis of the 100.00% 80.00% 23.4% 7.2% expenditure generated by the racing codes, 60.00% 11.2% participants and customers and highlights 40.00% 37.0% 20.00% the taxation revenues generated by 21.1% governments and employment impacts in 0.00% Queensland. Racing in QLD TOTAL ECONOMIC IMPACT DIRECT EXPENDITURE IMPACT After adjustments have been made to direct The direct expenditure impact of the racing spending to allow for margins, taxes and industry in Queensland totals more than inter-industry trade and when induced and $855.5 million. In the context of the State’s indirect impacts are included, the total Gross State Product, this equates to just Queensland Racing Industry contributes just over 0.47% being contributed by the racing over $1.44 billion towards Gross State industry. The racing industry, for the Product. Thoroughbred racing is responsible purposes of this study, has been defined to for more than 79%, with harness racing include the three codes of racing and the (11%) and greyhound racing (10%) making participants in the racing industry. up the remainder. This real value added

Direct Spending Direct % QLD equates to 0.80% of total GSP. ANZSIC Aggregations Spend GSP Agriculture, Forestry and Fishing $93.4 m 1.36% The racing industry in Queensland is Manufacturing $22.9 m 0.12% responsible for sustaining more than 18,580 Electricity, Gas and Water Supply $47.2 m 1.26% full time equivalent positions (FTE). Of this Construction $56.8 m 0.31% amount, more than 12,000 FTE positions are Wholesale Trade $30.7 m 0.32% sustained directly within the core racing Retail Trade $63.7 m 0.45% Accommodation, Cafes & Restaurants $24.6 m 0.46% industry with a further 6,580 within the Transport and Storage $9.6 m 0.07% broader employment market. Communication Services $29.1 m 0.75% Finance and Insurance $62.4 m 0.63% Essentially, for every $1 million in expenditure Property & Business Services $130.6 m 0.61% generated by the racing industry, up to 22 Education $13.2 m 0.16% FTE positions are created or sustained. In real Health & community Services $13.3 m 0.11% terms, it is likely that the 22 FTE actually Cultural and Recreational Services $169.9 m 6.82% reflects more than 46 individuals working in Personal and Other Services $88.1 m 2.16% Total Direct Expenditure $855.5 m 0.47% full time, part time or casual employment. Source: IER Pty. Ltd The racing industry employs more than The cultural and recreational services sector 29,000 individuals in full time, part time and of the economy receives the largest casual employment in Queensland – making contribution from the racing industry (6.82%) it an employer of more individuals than the followed by personal & other services electricity, gas and water supply sector (2.16%), agriculture, forestry and fishing (20,900) and just below the communication (1.36%) and electricity, gas & water (1.26%). services sector (33,300).

5

TBP.001.031.0006

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Taxation Revenue Generated PARTICIPANTS IN RACING Federal & Provincial $120.00 Mil When the number of individuals employed directly and indirectly by the racing industry is $100.00 Mil GST combined with the number of participants $54.73 Mil $80.00 Mil (breeders, trainers etc.), it equates to more $60.00 Mil than 68,130 people who have a direct involvement in the racing industry. $40.00 Mil Wagering Taxes Income Tax $20.00 Mil $35.85 Mil Participant Type Total Payroll Tax $36.88 Mil Stamp Duty Breeders 3,179 $9.03 Mil $0.00 Mil $4.28 Mil Staff Employed by Breeders 3,189 State Government Federal Government Owners and Syndicates 17,785 Trainers 2,760 Source: IER Pty. Ltd Staff Employed by Trainers 3,026 Total Participants in Producing Racing Animals 29,939 Race Club & Industry Paid Full Time Staff 390 TAXATION REVENUE Race Club & Industry Paid Part Time Staff 3,144 Contracted Staff 4,113 The activities of the racing industry generate Bookmakers 139 Bookmakers Staff 285 more than $140 million in taxation revenue Jockeys/Drivers 575 for the State and Federal Government. Total Participants in Producing Racing Product 8,646 TAB Wagering Staff 1,501 Indirect Employment 28,048 The State Government receives more than Total Participants in Racing 68,134 $103.9 million in taxation revenue from the Source: QRL, HRQ and GQL Queensland racing industry. The majority of this revenue is generated from GST and In addition to this, it is estimated that more wagering taxes. Whilst income tax and GST than 4,000 individuals provide voluntary are not taxes paid specially by the racing services to the Queensland Racing Industry. industry (i.e. if the racing industry did not Many of these volunteers provide their exist, these people would still be paying these services at regional racing clubs. taxes elsewhere), the $35.8 million LIVE CONSUMPTION OF THE RACING PRODUCT contributed from wagering tax is unique. The latest Australian Bureau of Statistics Data The Federal Government receives just over revealed that over 16.1% of Queenslanders’ $36.9 million in taxation revenue from the visit racecourses annually. This placed the Queensland racing industry, from income racing industry higher than other major taxes generated by those employed directly sports including rugby league (16%), motor by the racing industry. sports (11.9%) and AFL (7.4%). Approximately The importance of wagering taxation 500,000 Queenslanders attended a racing revenue cannot be understated. A decline in event, with similar numbers attending one or the racing industry’s success has a direct and more rugby league games. This was followed immediate impact on the level of taxation by motor sports (366,000), AFL (228,000) and revenue generated. A decline in the level of rugby union (188,000). wagering turnover would have a dramatic and immediate impact on this revenue stream (as would growth in wagering turnover in the opposite manner).

6

TBP.001.031.0007

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

The thoroughbred racing industry accounts PARTICIPANT EXPENDITURE for approximately 83% of individual visitors to racing. This is by far the highest proportion Breeders and trainers in Queensland spend amongst codes, and is likely driven by the more than $497 million in the pursuit of their large geographic spread of clubs and the employment or pastime. This expenditure higher proportion of event meetings. delivers considerable economic stimulus to Individual visitation to harness meetings was the community, with a large portion being 12% and for greyhound meetings 5%. spent outside the ‘core racing industry’. Veterinarians, feedstock merchants, transport, WAGERING IMPACTS logistics and travel organisations are just some examples of those who receive the More than $676.9 mil is wagered in benefit of this spending. Queensland on thoroughbred, harness & greyhound races held in the State. Of this The breeding sector spends more than amount, more than $480 mil is wagered with $148.3 million on the production of racing UniTAB. animals, whilst the training sector spends more than $349.4 million in preparing these Queensland Racing Product Total animals for racing. TAB Off-Course $430.51 mil Totalisator On-Course (TAB Meetings) $49.10 mil OWNERS OF RACEHORSES & GREYHOUNDS Totalisator On-Course (Non-TAB Meetings) $0.57 mil Bookmakers On-Course (TAB Meetings) $62.95 mil Owners deliver the important investment Bookmakers On-Course (Non-TAB Meetings) $5.93 mil Bookmakers Off-Course $127.91 mil which ultimately cascades throughout the Total $676.97 mil industry. There are more than 17,700 Source: QRL, HRQ and GQL registered owners in the Queensland Racing Industry, the majority of which are in the However, once Queensland betting on non thoroughbred sector. Owners are a vital cog local races is added to the UniTAB equation, in the business machines of both trainers and total wagering turnover rises to more than breeders. $2,036 mil. A large majority of the trainers’ revenue The total net wagering revenue generated by emanates from the fees charged to owners the racing industry in Queensland was in for the preparation of their racehorses and excess of $328.5 million in 2007/08. This greyhounds. Furthermore; through the amount fluctuates in line with total wagering auction process, owners provide the turnover. The racing industry received more investment to generate revenues for the than $128 million in net wagering revenue breeders who deliver the replenishment of distribution in 2007/08, which was then split the horse population. amongst the codes based on a pre- The 2008 Magic Millions thoroughbred determined distribution agreement. This auctions yielded more than $188 million in revenue stream is a vital part of ensuring that sales. This comprises not only sales to the racing industry remains vibrant and Queensland owners, but more importantly, sustainable. the export sales to visiting horse owners – which leads directly to growth in State Income.

7

TBP.001.031.0008

ACKNOWLEDGEMENTS This report has been compiled with the assistance of a great number of individuals working in, facilitating, participating in or consuming the racing product in Queensland. In particular, IER would like to acknowledge Malcolm Tuttle (Queensland Racing Limited), Tracey Harris (Harness Racing Queensland) and Darren Beavis (Greyhounds Queensland Limited).

We would also like to thank the following people for their contribution (in alphabetical order).

Paul Brennan Queensland Racing Limited David Boydell Australian Pacing Gold Adam Carter Queensland Racing Limited Michael Chapman Greyhound Owner David Chester Magic Millions Sales Pty Ltd Kearra Christensen Queensland Racing Limited Craig Coleman Tasmanian Government Stephen Ferguson Queensland Turf Club Des Friedrich Racing NT Denis Harvey South Australia Government Peter Johnson NSW Government Scott Kennedy Racing NSW Raymond Lowndes Harness Racing Historian Ron Mathofer Queensland Racing Limited Charlotte Mills Racing and Wagering Western Australia Kirsty O’Brien Greyhounds Queensland Limited Narelle Pearce Ipswich Greyhound Racing Club Ged Prescott Victorian Government Malcolm Richardson Northern Territory Government Barry Sargent Western Australian Government Paul Weeks Magic Millions Sales Pty Ltd

In addition, a large number of participants provided data on their racing activity and operations for use within the Size and Scope Study. We are grateful for the important data that these people provided.

TBP.001.031.0009

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

DISCLAIMER This research report includes an analysis of data derived from various sources including: - surveys of customers, surveys of participants (breeders, trainers, owners, drivers & jockeys), interviews with participants and data collected from various racing associated organizations and State Governments. Any conclusions contained within this report are based primarily on data provided by the aforementioned sources. It is the opinion of IER that the data collected from participants provided a reasonable representation of the industry.

In compiling this report, IER has made every effort to ensure the integrity of the data gathered and ultimately used. IER Pty. Ltd., its employees and agents do not accept any liability for any loss or damage which may arise as a consequence of any person or organization relying on the information contained within this report. The nature of economic projects is subject to variation based upon many factors, including the prevailing economic climate. This study provides an accurate assessment of the ‘state of play’ of the industry at a certain point of time.

9

TBP.001.031.0010

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

INTRODUCTION

ESTABLISHING THE INDUSTRY BASELINE The racing industry is a complex mix of sport, business, entertainment and community, rolled into a product and pastime enjoyed by many. There are a large number of participants who derive a living from their involvement in racing – a living that otherwise may not be possible, or may only be possible in another State or jurisdiction. Consumers enjoy the sport of racing, where uncertainty of outcome and the spectacle of racing horses and dogs, provides enjoyment to many. Surrounding the business and sport of racing, is the indomitable community linkages that exist between racing clubs and residents – reaching back decades or even centuries, where racing clubs were not only providers of entertainment opportunities, but also of vital community facilities.

Many studies have been conducted around the world, with the aim of assessing the ‘racing industry’. However, often through a lack of understanding of the intricacies of the racing industry, many of these studies fall short of developing a complete conceptual framework of the racing industry. A concise industry definition forms the pillar of any such work, allowing meaningful analysis and measurement as an industry and for the various sectors and stakeholders involved. Essentially, the definition of the ‘racing industry’ must encompass all activities for which the racehorse and greyhound is the key focus as well as business and activity which occurs, at least in part, to cater for this industry. A detailed outline of the ‘racing industry’ concept is discussed later in this report.

The essence of this study is that it should represent the base year in assessing of the size and scope of the racing industry. In aiming to achieve this, IER has assessed key racing industry data compiled over the last three racing seasons. Within this assessment, it must be acknowledged that Equine Influenza resulted in an abnormal racing season in 2007-08. As a consequence, IER has based much of its assessment on the years 2003-04 through to 2006-07. This approach will help ensure that the abnormalities that affected part of the 2007-08 racing season for the thoroughbred and harness racing industries, do not materially affect the typical industry activity.

WHY UNDERTAKE THIS STUDY? This study sets out to provide an evidence-based assessment of the economic and community importance of the racing industry to Queensland. It does so by identifying and quantifying the size, scope and importance of the industry in terms of:-

• Its economic contribution to QLD, including the generation of taxation revenue • The ability for racing to generate tourism, including intra-state tourism • The number of people who owe their livelihood to the racing industry • The community importance of racetracks and facilities • The importance of the ‘racing community’ which provides opportunities for inclusiveness and participation

10

TBP.001.031.0011

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Like the racing industry in many other parts of the world, there is much discussion and debate surrounding its size, value and importance. This study aims to provide the definitive, evidence based assessment of these factors. Whilst this study does not provide strategic direction for the industry, it will be vital input in developing these important higher level strategies. The information delivered through this study will help the industry to provide a strong, fact based representation of racing in Queensland.

CHALLENGES WITHIN THIS STUDY A study of this magnitude brings with it a number of issues. Thorough research can help to ameliorate these issues; however some issues simply need to be accepted as a reality of the study. These challenges include:-

AVAILABILITY OF DATA Assessing the size and scope of the racing industry requires a considerable amount of information and data to be collected and analysed. Whilst the information gathering process extended to all parts of the industry, some challenges remain:-

• The participants are not obliged to provide their personal and financial details to anyone. This study was fortunate to receive a good level of support from those participants who provided their assistance through interviews and quantitative research. • There is no requirement for all racetracks to lodge reports after each race meeting detailing items such as attendance. This can make it difficult to access complete sets of racing club data. This is, in part, a result of the large number of non-tab clubs who operate on minimal resources.

Where necessary data was not available, IER consulted the industry experts (particularly the QRL, HRQ and GQL) in order to provide an informed estimate of attendances at non-feature race meetings.

CONTEXTUALISING THE SIZE OF THE RACING INDUSTRY It is natural for industry to wish to understand its contribution to its economy and society. For instance, primary industries such as agriculture are clearly defined within the Australian & New Zealand Standard Industry Classification (ANZSIC) – as part of Division A – Agriculture, Forestry and Fishing. The racing industry, as a whole unit, is not represented in the ANZSIC at any level. Certain elements are, however, reflected in the classification system. Examples of these include:-

• The production of racehorses is contained within Division A - Agriculture, Forestry and Fishing • Parts of the production of accessories utilised within the racing industry (i.e. whips, saddles etc.) is contained within Division C – Manufacturing • The operation of racetracks and the consumption of the racing product by racehorse owners and racing fans are contained with Division P – Cultural & Recreational Services.

11

TBP.001.031.0012

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

The racing industry is made up of various industries from within a number of different industry classification sectors. It is for this reason that the racing industry must be conceptualized and defined.

Many other economic impact studies have attempted to present the final determination of the economic size of the racing industry, as a comparison against other industries (i.e. the racing industry is twice as large as the electricity sector). This type of comparison is, in essence, meaningless as within ANZSIC, the ‘racing industry’ would be spread amongst a number of sectors – including electricity. Any comparisons of size to standard industry sectors should be made with caution.

Within the economic modeling undertaken for this study, utilising the Monash Multi Regional Forecasting (MMRF) model, activities associated with racing (breeding, training, race club operation and wagering) are included in two larger composite industries. Specifically, the activity of breeding is part of Division A - Agriculture, Forestry and Fishing whilst the activities of training, race club operation and wagering are included in a residual services industry. Having breeding and stud operation in a separate agricultural composite industry does not pose special difficulties for this study. However, having the remaining racing activities lumped together with non-racing services does pose difficulties with respect to reporting and to simulation design. To avoid problems, the residual services category was split into the following four new industries.

• Thoroughbred Racing – which consists of enterprises engaged in operating facilities specially used and designed for the thoroughbred racing industry (including horse training, race club operation and those parts of totalisator agency operation and bookmaker operations dealing with thoroughbred racing; • Harness Racing – analogous to the thoroughbred racing industry but relating to harness racing; • Greyhound racing – analogous to the thoroughbred racing industry but relating to greyhound racing; and • Services – comprising the remainder of the previous miscellaneous services composite (primarily non-racing cultural and recreational services).

Key inputs to each industry are:

• Agriculture – animals (the horses and dogs used in racing);

• Labour (wages, salaries and supplements paid to jockeys, training staff, race club staff, etc.);

• Materials and services associated with running training operations, race clubs and betting facilities; and

• Capital (for which profit is the return).

Note that prize money, which is allocated from wagering revenue received by the totalisator agency, is part of the profit of each racing industry.

12

TBP.001.031.0013

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

EQUINE INFLUENZA During the 2007-08 racing season, an outbreak of equine influenza caused the thoroughbred and harness racing industries in Queensland and New South Wales to cease operation for a number of months. The impact of this, whilst significant at the time, was largely offset by the provision of a Federal Government assistance package. Following the outbreak of EI, the Federal Government made available a $235 million rescue package for the benefit of thoroughbred and harness racing in both Queensland and New South Wales

A report prepared by PriceWaterhouseCoopers in February 2008 for the Queensland Harness Racing Industry, found that in pure financial terms, the industry’s losses overall were more than offset by the access to various funds and assistance schemes made available following the outbreak. This is likely to have seriously reduced any immediate financial difficulties in these two States. It is likely however, that some sectors will continue to feel the impacts of EI in the near future. Breeders, for instance, are likely to feel the impact of an affected breeding season through foal crops in some subsequent years.

In compiling this report, it was important to identify the expenditure and participation areas that were abnormally different due to EI. In other words, presenting an assessment on the ‘typical’ number of starters during a racing season, based on 2007-08 data, would have been misleading. IER has, for some areas of this assessment, taken a rolling 5 year average, or excluded 2007/08 data, in order to best represent the ‘typical’ racing season impacts generated by the Queensland Racing Industry

13

TBP.001.031.0014

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

OBJECTIVES OF THE STUDY In determining the scope of work, IER, in consultation with Queensland Racing Ltd, Harness Racing QLD and Greyhounds Queensland Ltd set out the following objectives:-

1. To illustrate the economic value of Thoroughbred, Harness and Greyhound Racing in Queensland.

2. To illustrate the level of taxation revenue generated for both the state and federal governments and comparisons with other racing jurisdictions.

3. To raise the profile of Thoroughbred, Harness and Greyhound racing in Queensland through the provision of an independent and reliable assessment of its size and scope.

4. To provide a report that can be readily disseminated, in part or in its entirety, to the following key stakeholders

a. State of Queensland b. Federal Government of Australia c. Local Councils d. Potential Corporate Partners and Sponsors e. Industry Partners

5. To be used as a base measurement to estimate uplift in economic impact and employment for the Queensland economy through achieving the three codes’ business plan objectives.

6. To be used as a tool in the media to help gain positive exposure of the importance of the thoroughbred, harness and greyhound industries to Queensland

14

TBP.001.031.0015

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

SCOPE OF THE STUDY This report has been developed after an exhaustive information gathering process. IER has undertaken the following approaches to gathering this information:-

FACE TO FACE INTERVIEWS IER conducted a number of interviews at the governing body level of the industry including Queensland Racing Ltd, Harness Racing QLD and Greyhounds Queensland Ltd to determine the scope of the study and to gain an understanding of the key strategic issues facing the industry. Furthermore, the interview process was designed to capture industry level data and determine the most effective method to communicate with customers, participants and clubs.

CUSTOMER RESEARCH Customers were surveyed at a range of race meetings throughout Queensland in order to gain an understanding of their activities and spending habits surrounding major racing events. These activities and spending habits included expenditure at the racing event as well as non-event expenditure – off-course spending which has been stimulated because of the nature of the racing event e.g. fashion, transport and accommodation. Customers at major racing events in Brisbane and regional Queensland were asked a series of questions through both face to face and online surveys. These questions were designed to help provide a profile of event customers in Queensland.

PARTICIPANT RESEARCH Participants play a vital role in the viability and growth potential of the racing industry. IER canvassed a large number of participants from the three codes of racing in order to understand their participation levels, financial involvement and prevailing perceptions of their industry. The participant surveys were quantitative in nature and provided the detail which underpins the assessment of their contribution to the economy.

Owners, breeders and trainers of the three codes of racing in Queensland were surveyed to understand their level of spending in producing the racing animal. In many instances participants held multiples roles within the racing industry. It is important to understand the motivations of many owners, when looking at their financial involvement in racing. It became clear through the research that a large number of owners (and hobby trainers/breeders) consider the ‘acceptable ‘losses from involvement’ as opposed to the ‘expected profit’. In other words, they invest into the racing industry with the understanding that they may not achieve a return on investment. They invest because they love the horses or greyhounds or the thrill of racing. That is not to say that there aren’t owners who are involved to make a living, (nor that they do not want to make money), but understanding this distinction is important to appreciating the drivers to participation and industry growth. Jockeys and drivers (and trainer/drivers) were also surveyed to gain a greater understanding of their expenditure, motivations and perceptions of the industry.

In total, IER received more than 1,250 completed surveys during the conduct of the participant research.

15

TBP.001.031.0016

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

SECONDARY RESEARCH IER has compiled a number of economic and strategic reports which have been commissioned for the Australian Racing Board and other racing jurisdictions throughout Australia. Further to this, IER assessed the July 1998 report produced by KPMG – ‘Queensland Racing – An Assessment of its Economic Contribution to Queensland’. These reports proved valuable in the development of the methodology and the broad understanding of the racing industry. In addition to this, IER has assessed economic and strategic reports which have been prepared for other international racing jurisdictions.

DEFINING THE ‘RACING INDUSTRY’ One of the greatest challenges faced when talking about the ‘racing industry’ surrounds the exact nature of what the ‘industry’ actually is. In many ways it is a unique industry. Is it a sport or is it a business? Is it primary production or is it the production of an event? IER proposes that it is all of these and that is why many have found it difficult to define. At the primary production level, the industry not only supports the development of the horse population, but it also plays a vital role in maintaining working farms. At the business level, breeders, trainers, owners and the various suppliers to the industry are trying to maximise profits for themselves and their shareholders. Racing Clubs are trying to entertain their customers, whilst providing the venues for the athletes and their owners to ply their trade. In many cases, the participants have specific skills that are not readily transferrable to other industries or employment. At the sport or event level, racing is providing the racing fans with a spectacle, a pastime, an event - at the heart of which is the very principle that governs competitive sport – uncertainty of outcome.

The QRI encompasses a variety of organisations, participants and tiers. The three governing bodies of racing in Queensland (QRL, HRQ and GQL) coordinate, manage, and regulate the industry through a number of functions. These include: -

. Administration of the rules of racing; . Enforcement of standards of safety and integrity; . Licensing industry participants; . Registering race clubs and monitoring their activities; . Racecourse development and capital works; . Research and promotional activities; . Administration of industry funding and commercial agreements; and . Representing the Queensland Racing Industry on the peak national bodies within the three codes

At the core of the racing industry are the horses and organisations/activities that involve the use of horses for final consumption activities (i.e. horse racing). However, the core activity of racing supports a wide number of external industries – particularly in the areas of agriculture, transport and retail.

16

TBP.001.031.0017

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

INDUSTRY FINANCIAL FLOW The following diagram illustrates this relationship between the industry and other businesses:-

Figure 1 – Industry Financial Flow

Source: IER Pty Ltd

17

TBP.001.031.0018

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

The diagram on the previous page reveals the way in which funds flow into, within and out of the racing industry in Queensland. 1 The column titled “Investment into the industry” refers to the different methods that the industry employs to bring investment into the core racing industry from ‘outside the industry’. This is based on a defined concept of which organisations are within the core industry and which are not. Those organisations, who sit outside the ‘core industry’ in the model, are determined to be those who are neither necessarily integral to the operation of the industry, nor able to be directly controlled by the racing peak bodies or the Government.

Entities such as the Clubs, bookmakers, owners and trainers are all integral to the racing industry and also able to be directly influenced by the the governing bodies of the three codes actions through distributions, stakemoney, racedate allocations etc. Alternatively, service providers to the industry are outside the direct influence of the racing industry and are therefore deemed in economic terms, to be outside of the core racing industry.

Employees of businesses operating within the ‘core racing industry’ such as stablehands and bookmakers assistants, are not considered as separate entities in the racing industry, but rather are considered as part of the business entities within which they are employed.

The column titled “Final Expenditure” refers to the level at which the activities of the racing industry generate economic impacts. Within the core racing industry, funds flow in multiple directions as they move between different layers of activity. This is further explained through Figure 2 on page 20. However, it is when the funds finally leak out into the broader economy, that the economic impacts begin to accrue.

1 Based upon the racing industry model used by IER & Allan’s Consulting for a similar study relating to the Size and Scope of the Racing Industry in WA.

18

TBP.001.031.0019

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

DEVELOPING AN ECONOMIC METHODOLOGY

As outlined earlier, there is no defined industry, within standard industry classifications, which covers horse and greyhound racing. As such, any comparisons of economic impact can only be roughly compared to established and defined industries such as agriculture, forestry and fishing. This limitation however, only affects the extent to which racing (as an industry) can be directly lined up against other industries.

The methodology for assessing the economic value of the racing industry is established on the following basis:-

• The study uses the expenditure approach in its assessment of the economic impacts generated by racing. Essentially, the expenditure approach involves counting expenditures on goods and services by different racing industry groups in the economy. The four main components are consumption expenditures by households/individuals (C), gross private investment spending principally by business (I), government purchases of goods and services (G), and net exports (exports minus imports EX - IM). The following equation illustrates this process:

GSP = C + I + G + (EX - IM)

• The expenditure generated by the racing industry in Queensland leads to economic impacts for the local economy. These impacts are reflected in the following areas:- o Output o GSP o Employment o State Government Revenue

Output relates to the end product of transforming inputs into goods, or more generally, the process of transforming the different factors of production into goods and services destined for consumption. Output is also often referred to as economic activity.

GSP is a measure of the value of goods and services becoming available to the State as a result of economic activity in the nation.

Employment Impact provides analysis which determines the economic impact of employment in terms of jobs created and salaries and wages paid out. It is referred to in terms of full time equivalent positions and takes into account both full time and part time employment.

State Government Revenue is generated from a mixture of front-end taxes and specific industry taxes on gambling. Taxation on wagering in particular is a significant contributor to State government revenue.

19

TBP.001.031.0020

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

The economic impacts generated through the multiplier effects, as outlined in this study, have been calculated using the Monash Multi-Regional Forecasting (MMRF) model, which structures the business sector of the entire Queensland economy in terms of who makes what and who consumes what. Impacts have been accrued within the structure of the ANZSIC to ensure comparability of information.

The calculation of economic impacts Figure 2 – Avoiding Double Counting accruing from racing in Queensland is summarized in the table on page 21. In determining the economic impact of any industry, it is necessary to remove any double counting of expenditure, or otherwise risk overstating the net impact of expenditure generated in the economy. This is particularly important in the racing industry, given the complex, two way flow of funds that exists between participants (i.e. trainers and owners) and consumers. The adjacent illustration reveals the risks associated with not correctly dealing with the issue of double counting.

Trainers spend considerable amounts of money on the different elements of training horses and greyhounds. This includes veterinarians, feed & vitamins and gear. However they charge owners a fee which covers all of these items, with an added profit (which Source: IER Pty Ltd effectively hits their bottom line profit after expenses.) If the trainers’ expense and the owners’ expense where both counted towards economic impact, it would indeed be overstated.

The other key element of expenditure is delivered by wagering on horse racing. In some ways, TAB (pari-mutuel) wagering is no different to investing in the share market – particularly for professional bettors. The expenditure is incurred with the view of making a profit. However, the racing industry is different to the share market as aggregate returns, (the level of return on investment to the bettor), is predetermined. This is a result of fixed ‘take-out’ rates determined through the totalisator system of UniTAB. As such, when all betting activity is aggregated, the amount unpaid to bettors is referred to as Net Wagering Revenue. This revenue is then shared between the racing industry (39%), UniTAB (41%) and the Government (20%), determined by a revenue sharing agreement between the parties.

20

TBP.001.031.0021

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

The following table provides an overview of the elements that contribute to the economic impact of thoroughbred, harness and greyhound racing in Queensland.

Table 1 – Expenditure Generated by the Racing Industry Industry Industry Expenditure Sector Racehorse Owners contribute to the economic impact generated by racing through two primary means. Owners 1. They invest in racing stock through private sales and horse auctions (e.g. Magic Millions) 2. They also incur ongoing costs in terms of operating expenditure associated with keeping and training racehorses. The majority of these costs are wrapped up in trainers fees (incl. training fees, transport, veterinary, race entry fees etc.) Owners’ expenditure on racing stock is a very difficult item to quantify. This is because (as well as auctions) a ‘private’ market exists for horse transactions, which is not regulated or reported. Within the assessment of economic impacts in this report, owners’ expenditure, as outlined above, is defined as costs which are not incurred by the trainer – e.g. major veterinary operations, agistment for horses etc. Essentially however, the report has focused on the expenditure of breeders and trainers which in essence includes the majority of expenditure of owners’ due to the internal industry nature of their transactions. Trainers Trainers derive the majority of their income from providing training services to owners of racehorses. The majority of their revenue is realised through the daily training fee charged to owners; however they do also receive a share of prizemoney. Many horse and greyhound trainers in Queensland also own horses that they train and race themselves. This is not uncommon in other racing jurisdictions and is particularly prevalent in the greyhound industry, where many participants are also breeders. Breeders Breeders generate economic impact through their involvement in the production of racehorses and greyhounds. It is important in this study to take the expenditure generated by breeders when assessing economic impact, as there is little information available on the revenue generated from the private sale of horses and greyhounds. In any case, this will be likely to understate the economic impact if breeders in Queensland operate profitably across the board. (As outlined earlier, if the value of all horse sale transactions was known, then it would be preferable to incorporate the breeders contribution towards economic impact, based on the total value of horses sold. In a profitable breeding industry, this would therefore include their total operating costs, plus profit.) Customers Customers typically generate economic impact in three ways; 1. They spend money at racing clubs on consumer goods such as admissions, food and beverage, racebooks, membership and hospitality packages. 2. They spend money off-course in relation to racing. This includes transport, accommodation, fashion, food and beverages. In Queensland this is a significant impact in terms of the thoroughbred racing industry due to the event nature of major racedays. Whether a major racing carnival like Magic Millions or a regional Cup Day, these racing events can inspire significant tourism and retail spending to occur. 3. They also spend money on betting both on-course and off-course. In aggregate, punters are returned the majority of this money, with the remainder (net wagering revenue) being shared between UniTAB, the QRI and the Government. Corporate Corporate customers generate economic impacts through spending on sponsorships and corporate Customers hospitality packages in the racing industry. The majority of this revenue is captured by the three codes of racing at major or feature racedays. Governing The governing bodies of the three codes of racing in Queensland develop the strategic direction of the Bodies industry. They spend money on capital items, prizemoney allocation and operating activities in order to and Clubs facilitate the activity of the racing industry. These activities include registering race clubs, licensing trainers, jockeys, drivers, bookmakers and other industry participants, handicapping and grading, industry marketing and publications, administration of industry funding, appointment of stewards and industry level strategic planning. The Clubs are responsible for promotion of racedays, Club membership, catering and entertainment activities.

Source: IER

21

TBP.001.031.0022

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

THE PARTICIPANTS IN RACING Thoroughbred, harness and greyhound racing not only provides entertainment and gambling opportunities, it also provides a living to a significant number of residents in Queensland. Participants can largely be categorised into three main segments:-

• Participants in the production of horses and greyhounds – These people are the primary producers, delivering the most important element of the racing product – the racehorses and greyhounds. They are responsible for breeding, rearing, training and caring for the animals. These participants represent different levels of involvement in the industry. Some provide the investment – the capital required to purchase the racing stock, whilst others provide the skill in training and developing the horses and greyhounds for racing.

• Participants in the production of the racing product – These people are those who are responsible for bringing the racing product together on-course. The majority of these participants are employed directly by racing clubs and peak bodies; however, there are some who are employed by UniTAB and Bookmakers.

• Racing and Betting Customers – These are the consumers of the racing product. The racing product includes the races themselves, as well as the events that are built around race meetings. These customers interact with the racing industry through three main touch points:- o Attendance at race meetings held in Queensland o Betting on races on-course in Queensland o Betting on races through off-course wagering portals in Queensland

It is important to distinguish between the concept of participants, used throughout this study, and the concept of employment. The assessment of participants in the racing industry is framed loosely around the sum of those employed by racing and those involved in racing. Owners, for instance, are technically not employed in racing. Nor are they always an employer in the racing industry. They are more akin to customers; however they play a greater role as investors. Either way, they can be accurately defined as a participant in the industry. Jockeys, for the most part, could mostly be defined as being self employed businesses. However to some degree, they are employed by trainers, owners and racing clubs depending on which vantage point is taken. Again, either way it is viewed, they are definitely participants in the industry.

This report will, within a later section, detail the level of employment sustained by the activities generated by the racing industry. This will effectively illustrate a smaller subsection of the total participation in the racing industry.

22

TBP.001.031.0023

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Thoroughbred Harness Greyhound Total2 Breeders 2,130 663 386 3,179 Staff Employed by Breeders 2,373 643 173 3,189 Owners and Syndicates 13,466 1,880 2,439 17,785 Trainers 1,153 433 1,174 2,760 Staff Employed by Trainers 1,876 446 704 3,026 Total Participants in Producing Racing Animals 20,998 4,065 4,876 29,939 Club & Industry Body Paid Full Time Staff 300 48 42 390 Club & Industry Body Paid Part Time Staff 2,500 348 296 3,144 Contracted Staff 3,510 322 281 4,113 Bookmakers 115 9 15 139 Bookmakers Staff 230 27 28 285 Jockeys/Drivers 273 302 575 Total Employees & Participants3 Producing Racing Product 6,928 1,056 662 8,646 TAB Wagering Staff 1,501 Total Participants in Racing 27,926 5,121 5,538 40,086 Source: QRL, HRQ and GQL,

There are more than 40,000 individuals in Queensland who participate in the racing industry. Nearly 75% of these participants are involved in the production of the racehorses and greyhounds.

In addition to this, it is estimated that more than 4,000 people provide their voluntary time and efforts to assist in the operation of the racing industry. A large proportion of these volunteers provide their skills on various boards throughout the industry, whilst volunteers also fill rolls at race clubs and with trainers and breeders. The monetary value of these volunteers is hard to quantify. Suffice to say there exists a number of small ‘community racing clubs’ that survive solely on the strength of their volunteer support. To these clubs, the value of these volunteers can be measured purely by their ongoing ability to survive.

2 Note: This table refers to individuals. It is not a measure of FTE positions 3 Participants in producing the racing product include clubs and industry bodies

23

TBP.001.031.0024

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

BREEDING RACING HORSES & GREYHOUNDS Breeders play an integral role in the racing industry, through the generation and re-generation of racing stock. As seen in other racing jurisdictions in Australia, breeders can range from those who operate large breeding operations to individuals who breed a horse or greyhound on their property, to those who own (or co-own) the animal and take no part in the ‘hands-on’ elements of the breeding operation. Similar to trainers (unlike owners, jockeys and drivers), breeders have a much larger number of cost centres in relation to their breeding activities. However, costs associated with wages, service fees and feed are often the largest single components of their expenditure. Within the racing industry, breeding is the most capital intensive operation, bringing with it considerable investment in infrastructure and capital development.

In many jurisdictions, a key indicator of a healthy breeding industry is contained in the level and value of horse sales achieved at auction, however many horses and greyhounds are sold privately. The thoroughbred industry in Queensland holds a number of sales throughout the year at the Gold Coast Magic Millions Sales complex, which last year recorded turnover in excess of $188 million in bloodstock. Australian Pacing Gold is the national body for selling standardbreds and this year’s auction in Brisbane yielded over $500,000 in aggregate sales. The Ipswich Racing Club conducts the annual sale for greyhounds with aggregate sales over $300,000 in 2008.

Data received from a survey of over 150 breeders in the QRI revealed the following results: -

Thoroughbred Breeders

• 21% of breeders considered their role full-time, 39% part-time and 40% a hobby interest • The average breeder has been breeding racehorses for 11.5 years • 64% own or lease a property for the purpose of breeding thoroughbreds • 39% of breeders employ family members in their breeding operations • In the past 3 years 21% of breeders have purchased a property for the purpose of breeding horses • 36% of breeders are also owners of racehorses • 86% of breeders supplement their breeding with income from other sources • 34% of breeders intend to increase their involvement in the racing industry.

Harness Breeders

• 16% of breeders considered their role full-time, 37% part-time and 47% a hobby interest • The average breeder has been breeding racehorses for 13.5 years • 68% own or lease a property for the purpose of breeding standardbreds • 42% of breeders employ family members in their breeding operations • 44% of breeders are also owners of racehorses • 91% of breeders supplement their breeding with income from other sources • 25% of breeders intend to increase their involvement in the racing industry.

24

TBP.001.031.0025

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Greyhound Breeders

• 15% of breeders considered their role full-time, 39% part-time and 46% a hobby interest • The average breeder has been breeding greyhounds for 14 years • 23% own or lease a property for the purpose of breeding greyhounds • 33% of breeders employ family members in their breeding operations • 56% of breeders are also owners of racing greyhounds • 88% of breeders supplement their breeding with income from other sources • 17% of breeders intend to increase their involvement in the racing industry.

CURRENT TRENDS It is estimated that thoroughbred Total number of Broodmares & Foals in Broodmares Foals breeders in Queensland produce 3,400 Queensland - 5 Year Trend (Thoroughbred) 7,000 foals each year, approximately 20% of 6,000 the national foal crop. The total number 5,000 of thoroughbred broodmares in 4,000 Queensland has increased by 300 since 3,000 2002/03. In the 2006/07 breeding 2,000 season, there was an estimated 6,040 1,000 broodmares in the Queensland - thoroughbred racing industry. 2002/03 2003/04 2004/05 2005/06 2006/07 Source: QRL, HRQ and GQL,

Total number of Broodmares & Foals in Broodmares More than 500 foals are produced by Queensland - 5 Year Trend (Harness) harness breeders each year. It is 700 Foals important to note that the national 600 harness racing foal crop has fallen by 500 half in the last 20 years, most likely 400 attributable to environmental 300 conditions, such as drought. The 200 number of standardbred broodmares 100 has dropped marginally in the last 5 0 years, despite experiencing significant 2003/04 2004/05 2005/06 2006/07 2007/08 growth in 2005/06. In the 2007/08 Source: QRL, HRQ and GQL, breeding season, there was an estimated 450 broodmares in the Queensland harness racing industry.

25

TBP.001.031.0026

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Greyhound breeders produced over Total number of Litters & Pups in Queensland Litters 380 litters in 2006/07 - an increase of 5 Year Trend Pups 8% in 12 months. With an average 2500 litter comprising just over 6 pups, this 2000 equates to more than 2300 pups per year - an increase of 15% compared to 1500 the 2006/07 breeding season. The 1000 number of litters produced has 500 remained fairly stable over the last five years. 0 2003/04 2004/05 2005/06 2006/07 2007/08 Source: QRL, HRQ and GQL, BREEDER MOTIVATIONS IER asked breeders to suggest the key drivers that motivate their involvement in racing as a breeder. Understanding the key drivers can assist the industry in maintaining the involvement of existing breeders. Furthermore, IER assessed the future level of involvement in the racing industry, in terms of maintaining, decreasing or increasing the size of their breeding operation.

Thoroughbred, harness and greyhound breeders identified a number of motivating factors behind their participation in the racing industry. IER found many of the responses across all three codes to be similar. They include: -

• To earn a return on investment • To breed a champion horse/dog • Love of the animal • To breed Group winning horses/greyhounds

Similar to owners and trainers, the breeders in the QRI are passionate about both the animal and the industry. The greyhound breeding sector differed from thoroughbred and harness code in that many greyhound breeders held multiple participant roles. This meant that their motivations for participating in the industry were similar across participant groups.

The chart (over page) illustrates the future intentions of breeders for the three codes of racing. IER asked breeders if they intended to maintain, decrease or increase the size of their breeding interest or operations. The majority of harness (56%) and greyhound (67%) breeders intend to maintain their level of involvement in the breeding industry. In the thoroughbred sector, approximately 35% intend to maintain their involvement and 35% intend to increase their involvement. In all sectors, there are more breeders indicating that they are likely to increase their involvement than scale down.

26

TBP.001.031.0027

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Future level of involvement in the racing industry Greyhound Harness Thoroughbred Breeders 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% I intend to decrease my level of I intend to increase my level of I intend to maintain my level of involvement over the next 5 years involvement over the next 5 years involvement over the next 5 years Source: Participant Survey conducted by IER BREEDERS EXPENDITURE

As outlined earlier, this study has focused on identifying the expenditure generated by breeders as opposed to the expenditure generated by owners on purchasing racehorses and greyhounds. Breeders generate expenditure in the process of playing their role in replenishing racehorse and greyhound stocks. In determining the expenditure impact of the breeding sector, IER has modeled spending based on a ‘per breeder’ classification within different levels of activity. Whilst there is a wide gap between the upper level (large breeding stud) and lower level (non active or silent share breeder (i.e. part broodmare owner)), this has been proven to be the most accurate method of assessment. For the purposes of this study, breeders were asked to classify themselves as full time, part time or hobby in nature.

THOROUGHBRED BREEDERS The following table illustrates the expenditure incurred by Thoroughbred breeders in the production of racing horses:-

Per Breeder Per Breeder Per Breeder Total Annual Cost Expense Area Full Time Part Time Hobby Vets Fees $8,299 $3,162 $1,431 $7,530,083 Agistment Fees $3,181 $1,212 $549 $2,886,532 Gear & Accessories $2,868 $1,093 $494 $2,602,062 Farriers Fees $1,383 $527 $239 $1,255,014 Commercial Float Fees $1,752 $668 $302 $1,589,684 Vehicle or Float Maintenance $2,305 $878 $398 $2,091,690 Fuel $3,504 $1,335 $604 $3,179,368 Sales Entry Fees $1,420 $541 $245 $1,288,481 Feedstock (incl Supplements) $14,754 $5,621 $2,544 $13,386,815 Wages $16,598 $6,324 $2,862 $15,060,166 Insurance $2,729 $1,040 $471 $2,476,561 Service Fees $13,832 $5,270 $2,385 $12,550,139 Marketing & Promotion $2,665 $1,015 $460 $2,417,993 Travel Expenses $2,766 $1,054 $477 $2,510,028 Administration Expenses $9,608 $3,661 $1,657 $8,718,163 Other Expenses $4,546 $1,732 $784 $4,124,812 Property Maintenance $15,684 $6,110 $1,883 $13,666,695 Capital Improvements $10,297 $6,465 $1,013 $10,916,824 Mortgage/Lease Payments $11,037 $4,006 $86 $8,336,193 Total Cost $129,229 $51,714 $18,882 $116,587,303 Source: Participant Survey conducted by IER

27

TBP.001.031.0028

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Thoroughbred breeders spend more than $116.5 million on the management of mares and stallions, production of foals and care of yearlings each year. The cost of service fees, wages, feedstock and property expenses make up the largest components of expenditure.

Proportion of Expenditure in Breeding Thoroughbreds

Mortgage/Lease Payments 7.15% Capital Improvements 9.36% Property Maintenance 11.72% Other Expenses 3.54% Administration Expenses 7.48% Travel Expenses 2.15% Marketing & Promotion 2.07% Service Fees 10.76% Insurance 2.12% Wages 12.92% Feedstock (incl Supplements) 11.48% Sales Entry Fees 1.11% Fuel 2.73% Vehicle or Float Maintenance 1.79% Commercial Float Fees 1.36% Farriers Fees 1.08% Gear & Accessories 2.23% Agistment Fees 2.48% Vets Fees 6.46%

0% 2% 4% 6% 8% 10% 12% 14%

Source: Participant Survey conducted by IER

Data collected through the participant survey was used to estimate the direct employment generated by thoroughbred breeders. The economic activity undertaken by breeders in Queensland is estimated to sustain the paid employment of approximately 2,373 individuals (related to breeding activities). Based upon data provided by breeders relating to the average number of hours worked by their staff, the paid activity equates to 1,472 full time equivalent positions that are sustained by thoroughbred breeders in Queensland. This analysis indicates that the typical individual working in paid employment for a thoroughbred breeder does so for approximately 62.0% of a full time equivalent position – or just over 24.8 hours per week.

28

TBP.001.031.0029

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

HARNESS BREEDERS The following table illustrates the expenditure incurred by Harness breeders in the preparation of racing horses:-

Per Breeder Per Breeder Per Breeder Total Annual Cost Expense Area Full Time Part Time Hobby Vets Fees $6,289 $2,841 $1,399 $2,057,900 Agistment Fees $2,893 $1,306 $643 $946,634 Gear & Accessories $2,948. $1,332 $656 $964,926 Farriers Fees $621 $280 $138 $203,503 Commercial Float Fees $2,166 $978 $482 $708,832 Vehicle or Float Maintenance $2,082 $940 $463. $681,393 Fuel $2,872. $1,297 $639 $939,774 Sales Entry Fees $698 $315 $155 $228,656 Feedstock (incl Supplements) $13,976 $6,313 $3,110 $4,573,110 Wages $13,277 $5,997 $2,954 $4,344,455 Insurance $1,747. $789 $388 $571,639 Service Fees $5,241 $2,367 $1,166 $1,714,916 Marketing & Promotion $2,795 $1,262 $622 $914,622 Travel Expenses $1,984 $896 $441 $649,382 Administration Expenses $8,190 $3,699 $1,822 $2,679,843 Other Expenses $2,096 $947 $466 $685,967 Property Maintenance $8,968 $4,221 $1,008 $2,775,627 Capital Improvements $7,000 $5,008 $364 $2,605,571 Mortgage/Lease Payments $4,401 $1,451 $81 $1,082,194 Total Cost $90,251 $42,249 $17,004 $29,328,944

Source: Participant Survey conducted by IER Harness breeders spend more than $29.3 million on the production of racing horses each year. Feedstock, wages, administration and property maintenance were the areas that recorded the highest amount of expenditure.

29

TBP.001.031.0030

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Proportion of Expenditure in Breeding Standardbreds

Mortgage/Lease Payments 3.69% Capital Improvements 8.88% Property Maintenance 9.46% Other Expenses 2.34% Administration Expenses 9.14% Travel Expenses 2.21% Marketing & Promotion 3.12% Service Fees 5.85% Insurance 1.95% Wages 14.81% Feedstock (incl Supplements) 15.59% Sales Entry Fees 0.78% Fuel 3.20% Vehicle or Float Maintenance 2.32% Commercial Float Fees 2.42% Farriers Fees 0.69% Gear & Accessories 3.29% Agistment Fees 3.23% Vets Fees 7.02%

0% 5% 10% 15% 20% Source: Participant Survey conducted by IER Data collected through the participant survey was used to estimate the direct employment generated by harness breeders. The economic activity undertaken by breeders in Queensland is estimated to sustain the paid employment of approximately 643 individuals (related to breeding activities). Based upon data provided by breeders relating to the average number of hours worked by their staff, the paid activity equates to 274 full time equivalent positions that are sustained by harness breeder in Queensland. This analysis indicates that the typical individual working in paid employment for a harness breeder does so for approximately 42.6% of a full time equivalent position – or just over 17 hours per week.

30

TBP.001.031.0031

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

GREYHOUND BREEDERS The following table illustrates the expenditure incurred by Greyhound breeders in the preparation of racing horses:-

Per Breeder Per Breeder Per Breeder Total Annual Cost Expense Area Full Time Part Time Hobby Vets Fees $1,338 $627 $248 $87,023 Gear & Accessories $669 $313 $124 $43,511 Vehicle or Trailer Maintenance $1,673 $784 $311 $108,779 Fuel $1,191 $558 $221 $77,450 Feed (incl Supplements) $11,714 $5,489 $2,177 $761,450 Wages $4,016 $1,882 $746 $261,069 Insurance $585 $274 $108 $38,073 Service Fees $2,955 $1,384 $549 $192,103 Marketing & Promotion $629 $294 $116 $40,901 Travel Expenses $1,522 $713 $283 $98,989 Administration Expenses $3,681 $1,725 $684 $239,313 Other Expenses $3,490 $1,635 $648. $226,912 Property Maintenance $3,058 $840 $0.00 $61,076 Capital Improvements $1,105 $209 $0.00 $19,331 Mortgage/Lease Payments $326 $98 $0.00 $6,765 Total Cost $37,959 $16,833 $6,222 $2,262,745

Source: Participant Survey conducted by IER

Greyhound breeders spend more than $2.2 million on the preparation of greyhounds each year. Feed and wages make up the largest proportion of their expenditure.

Proportion of Expenditure in Breeding Greyhounds

Capital Improvements 0.85%

Property Maintenance 2.70%

Other Expenses 10.03%

Administration Expenses 10.58%

Travel Expenses 4.37%

Marketing & Promotion 1.81%

Service Fees 8.49%

Insurance 1.68%

Wages 11.54%

Feed (incl Supplements) 33.65%

Fuel 3.42%

Vehicle or Trailer Maintenance 4.81%

Gear & Accessories 1.92%

Vets Fees 3.85%

0% 10% 20% 30% 40%

Source: Participant Survey conducted by IER

31

TBP.001.031.0032

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Data collected through the participant survey was used to estimate the direct employment generated by greyhound breeders. The economic activity undertaken by breeders in Queensland is estimated to sustain the paid employment of approximately 173 individuals (related to breeding activities). Based upon data provided by breeders relating to the average number of hours worked by their staff, the paid activity equates to 71 full time equivalent positions that are sustained by greyhound breeders in Queensland. This analysis indicates that the typical individual working in paid employment for a greyhound breeder does so for approximately 41.1% of a full time equivalent position – or just over 16.4 hours per week.

Across the three codes of racing, breeders spend more than $148.2 million each year on the production of thoroughbreds, standardbreds and greyhounds.

32

TBP.001.031.0033

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Figure 3 –Key Breeding Statistics

33

TBP.001.031.0034

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

TRAINING HORSES & GREYHOUNDS The QRI is largely sustained by the participants who provide investment and skill to produce the racehorses. Trainers bring the skill to the industry, through their preparation of the racehorses. In essence, racehorse owners entrust their valuable investment in the hands of the trainers, who not only teach the horse how to race, but care for its health and well-being. As detailed previously, the trainers’ primary revenue source is from training fees paid by owners and 10% of any stake money. Trainers’ expenditure generates considerable impacts in the economy through the consumption of a variety of goods and services in the market.

It is estimated that there are more than 2750 trainers operating in the three codes of racing. This consists of more than 1150 thoroughbred trainers, 430 harness trainers and 1170 greyhound trainers. An analysis of a five-year trend of the number of trainers’ revealed a slight decrease in all codes. This is typical of many racing jurisdictions where there has been a decrease in hobby trainers and growth in the size of operation of major trainers. Data received from a survey completed by more than 340 trainers in the QRI revealed the following results: -

The typical thoroughbred trainer: - • has ownership interests in racehorses (88%) • has an average of seven horses in work in a season • has been training for 18 years • 50% of trainers employ their family members • 17% of trainers are female • Trains an average of 6.8 horses per season

The typical harness trainer: - • 70% of trainers are also drivers • has ownership interests in racehorses (78%) • has an average of nine horses in work in a season • has been training for 20 years • 31% of trainers employ their family members • 18% of trainers are female • Trains an average of 6.4 horses per season

The typical greyhound trainer: - • has ownership interests in racehorses (89%) • has an average of nine greyhounds in work in a season • has been training for 18 years • 28% of trainers employ their family members • 20% of trainers are female • Trains an average of 5.1 greyhounds per season

34

TBP.001.031.0035

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

ROLES HELD BY TRAINERS The number of participants who solely engage in training activities are quite few in Queensland, with the majority also engaging in other activities including owning, breeding and in harness racing, driving.

IER’s survey of thoroughbred trainers in Roles held within the Thoroughbred Queensland revealed that close to 88% also had training sector ownership interests in racehorses. All trainers 100.0% were more likely to have co-ownerships or 80.0% partnerships (80%) in racehorses; however, the 60.0% smaller the sized racing operation, the more 40.0% likely they were to be sole owners. Just over 30% 20.0% of trainers also play a role in breeding 0.0% racehorses. The larger trainers (No 1 and No 2 trainers) are significantly less likely to breed Owner Breeder horses (16%) compared to smaller sized training Source: Participant Survey conducted by IER operations (37%).

Trainers in the harness racing sector have the Roles held within opportunity to engage in owning, breeding and the Harness training sector driving. Their participation in these activities is 100.0% strong. The survey revealed that close to 80% of 80.0% trainers own horses. Over 92% of the larger 60.0% training operations own horses, the majority in 40.0% either partnerships or as sole owners. Unlike the 20.0% thoroughbred sector, training in the harness racing

0.0% sector goes hand in hand with driving – with just over 70% of trainers also undertaking the role of Owner Breeder Driver driving. Furthermore, the survey revealed that Source: Participant Survey conducted by IER 45% also play a role in the breeding industry.

Similar to the thoroughbred sector, 89% of Roles held within the Greyhound greyhound trainers are owners. Also comparable training sector is the fact that ownership is more likely to 100.0% decrease as the size of the training operation 80.0% increases. Just under 80% of the larger training 60.0% operations owned greyhounds. 38% of trainers 40.0% also bred greyhounds. Unlike the thoroughbred sector, the bigger training operations (Class 1 & 20.0% 2 license holders) were more likely to be 0.0% breeders - 47%. Owner Breeder

Source: Participant Survey conducted by IER

35

TBP.001.031.0036

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

TRAINERS MOTIVATIONS IER asked trainers to suggest the key drivers that motivate their involvement in the racing industry. These drivers are important in understanding why trainers are involved in the industry and what elements will attract new participants. Furthermore, IER assessed the future level of involvement in the racing industry, in terms of maintaining, decreasing or increasing the size of their training operation.

Thoroughbred, harness and greyhound trainers identified a number of motivating factors for why they participate in the racing industry. IER found many of the responses across all three codes to be similar. They include: -

• Love of the animal • Love of racing • Family involvement • Thrill of winning • To earn a return on investment

The survey revealed that trainers at all levels were very passionate about their industry. They have either grown up in the industry or have been introduced by a friend or colleague and built a connection with the animal and the racing environment. IER found that trainers with a medium to large operation clearly identified earning a return on their investment as being the key driver. This is vital for these participants as it is their full or part-time occupation. The social elements of racing were also identified by a number of respondents – “an interest of training, owning and breeding shared by my wife, myself and 3 professional sons”. Many greyhound trainers also identified the active/exercise elements of training the animal.

The following chart illustrates the future intentions of trainers for each of the three codes of racing. As mentioned above, IER asked trainers if they intended to maintain, decrease or increase the size of their training operations. Approximately half of all trainers (56% Thoroughbred and 46% Harness and Greyhound) intend to maintain their level of involvement in the racing industry. More thoroughbred and harness trainers intend to increase (T -25% and H-31%) their operations compared to decreasing (T -19% and H-23%). However, more trainers in the greyhound sector are likely to reduce (34%) their involvement than expand (20%).

Future level of involvement in the racing industry Greyhound Harness Thoroughbred Trainers 60.0% 50.0%

40.0%

30.0%

20.0% 10.0% 0.0% I intend to decrease my level of I intend to increase my level of I intend to maintain my level of involvement over the next 5 years involvement over the next 5 years involvement over the next 5 years

Source: Participant Survey conducted by IER

36

TBP.001.031.0037

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

The major reasons for trainers expanding their business centered on the opportunities to increase their return on investment, train winning horses/greyhounds and to be successful. Trainers decreasing the size of their operation indicated many reasons; however costs (particularly overheads) were clearly the most common factors.

COST OF PRODUCING RACEHORSES AND GREYHOUNDS Data collected from primary research undertaken within the training sector of the QRI, revealed that the average weighted daily training fee is: -

• Thoroughbred Trainers $ 54 per day • Harness Trainers $ 34 per day • Greyhound Trainers $ 13 per day

Training fees for participants can vary depending on a trainer’s success rate and scale of operation. At the higher end, thoroughbred trainers can charge up to $90 per day in the current market. Harness trainers at the highest end can charge up to $45 per day, whilst greyhound trainers can charge up to $15 per day. Thoroughbred and harness trainers generally charge a daily training fee which covers a number of incidental expenses. Large expenses are often charged on top of the daily fee. Greyhound trainers however, pay for all expenses associated with training and upkeep, as well as taking 50% of all prizemoney earned.

PRODUCING THOROUGHBRED RACEHORSES The following table illustrates the expenditure incurred by thoroughbred trainers and owners in the preparation of racing horses. Note, for the purposes of the economic assessment, the owners and trainers costs have been compiled within the ‘cost of producing a racehorse’. This means that the profit derived by trainers (a cost to owners) is included in the chart below:-

Per Horse Per Expense Area Total Annual Cost Day Training Fee Profit $21.77 $58,531,406 License Fees $0.41 $1,093,139 Vet Fees $1.63 $4,372,555 Trainers and owners spend more than Agistment Fees $1.02 $2,732,847 Gear & Accessories $1.63 $4,372,555 $285.0 million on the preparation of Farriers Fees $1.63 $4,372,555 thoroughbred racehorses each year. Commercial Float Fees $1.22 $3,279,416 Vehicle or Float Maintenance $1.02 $2,732,847 This includes the proportion of profit Fuel $2.03 $5,465,694 that is generated by trainers. Property Race Entry Fees $0.41 $1,093,139 Feedstock (incl. Supplements) $6.91 $18,583,358 related expenses (including Wages $20.14 $54,140,852 maintenance and amortised Insurance $1.02 $2,732,847 Stable Rent $3.25 $8,745,110 improvements), wages and salaries and Track Fees $0.41 $1,093,139 feedstock are the largest expenditure Marketing & Promotion $1.22 $3,279,416 items. Travel Expenses $1.02 $2,732,847 Administration Expenses $3.66 $9,838,248 Track Rider Fees $2.44 $6,558,832 Other Expenses $1.63 $4,372,555 Property Maintenance $8.19 $22,016,563 Capital Improvements $7.58 $20,377,541 Mortgage/Lease Payments $15.83 $42,554,602 Total Cost $106.04 $285,072,061 Source: Participant Survey conducted by IER

37

TBP.001.031.0038

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Proportion of Expenditure in Preparing Thoroughbred Racehorses

Mortgage/Lease Payments 18.78% Capital Improvements 9.00% Property Maintenance 9.72% Other Expenses 1.93% Track Rider Fees 2.90% Administration Expenses 4.34% Travel Expenses 1.21% Marketing & Promotion 1.45% Track Fees 0.48% Stable Rent 3.86% Insurance 1.21% Wages 23.90% Feedstock (incl Supplements) 8.20% Race Entry Fees 0.48% Fuel 2.41% Vehicle or Float Maintenance 1.21% Commercial Float Fees 1.45% Farriers Fees 1.93% Gear & Accessories 1.93% Agistment Fees 1.21% Vet Fees 1.93% Licence Fees 0.48%

0% 5% 10% 15% 20% 25% 30% Source: Participant Survey conducted by IER Data collected through the participant survey was used to estimate the direct employment generated by thoroughbred trainers. The economic activity undertaken by trainers in Queensland is estimated to sustain the paid employment of approximately 1,876 individuals (related to training activities). Based upon data provided by trainers relating to the average number of hours worked by their staff, the paid activity equates to 1,011 full time equivalent positions that are sustained by thoroughbred trainers in Queensland. This analysis indicates that the typical individual working in paid employment for a thoroughbred trainer does so for approximately 53.9% of a full time equivalent position – or just over 21.5 hours per week.

38

TBP.001.031.0039

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

PRODUCING HARNESS RACEHORSES The following table illustrates the expenditure incurred by harness trainers and owners in the preparation of racing horses. Note, for the purposes of the economic assessment, the owners and trainers costs have been compiled within the ‘cost of producing a racehorse’. This means that the profit derived by trainers (a cost to owners) is included in the chart below:-

Per Horse Per Total Annual Expense Area Day Cost

Training Fee Profit $12.73 $7,405,870 License Fees $0.41 $236,587 Vet Fees $1.22 $708,341 Trainers and owners spend more than Agistment Fees $0.81 $473,008 Gear & Accessories $2.41 $1,399,507 $47.0 million on the preparation of harness Farriers Fees $1.23 $715,912 racehorses each year. This includes the Commercial Float Fees $1.42 $828,054 Vehicle or Float Maintenance $2.03 $1,182,935 proportion of profit that is generated by Fuel $2.42 $1,408,237 trainers. Property related expenses Race Entry Fees $0.86 $501,091 Feedstock (incl. Supplements) $8.13 $4,731,740 (including maintenance and amortised Wages $8.54 $4,968,327 improvements), wages and salaries and Insurance $0.83 $483,489 feedstock are the largest expenditure Stable Rent $2.24 $1,301,228 Marketing & Promotion $1.40 $815,137 items. Travel Expenses $0.81 $473,174 Administration Expenses $3.25 $1,892,696 Track Rider Fees $2.01 $1,172,052 Other Expenses $0.63 $367,183 Property Maintenance $4.51 $2,624,340 Capital Improvements $9.66 $5,618,752 Mortgage/Lease Payments $13.28 $7,723,896 Total Cost $80.84 $47,031,557 Source: Participant Survey conducted by IER

Proportion of Expenditure in Preparing Harness Racehorses Mortgage/Lease Payments 19.49% Capital Improvements 14.18% Property Maintenance 6.62% Other Expenses 0.93% Track Rider Fees 2.96% Administration Expenses 4.78% Travel Expenses 1.19% Marketing & Promotion 2.06% Stable Rent 3.28% Insurance 1.22% Wages 12.54% Feedstock (incl Supplements) 11.94% Race Entry Fees 1.26% Fuel 3.55% Vehicle or Float Maintenance 2.99% Commercial Float Fees 2.09% Farriers Fees 1.81% Gear & Accessories 3.53% Agistment Fees 1.19% Vet Fees 1.79% Licence Fees 0.60%

0% 5% 10% 15% 20% 25%

Source: Participant Survey conducted by IER

39

TBP.001.031.0040

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Data collected through the participant survey was used to estimate the direct employment generated by harness trainers. The economic activity undertaken by trainers in Queensland is estimated to sustain the paid employment of approximately 446 individuals (related to training activities). Based upon data provided by trainers relating to the average number of hours worked by their staff, the paid activity equates to 208 full time equivalent positions that are sustained by harness trainers in Queensland. This analysis indicates that the typical individual working in paid employment for a harness trainer does so for approximately 46.6% of a full time equivalent position – or just under 19 hours per week.

PRODUCING GREYHOUNDS The following table illustrates the expenditure incurred by greyhound trainers and owners in the preparation of greyhounds. Note, for the purposes of the economic assessment, the owners and trainers costs have been compiled within the ‘cost of producing a greyhound’. This means that the profit derived by trainers (a cost to owners) is included in the chart below:-

Per Greyhound Total Annual Expense Area Per Day Cost

Training Fee Profit $5.12 $6,623,027 License Fees $0.12 $155,227 Vets Fees $0.84 $1,086,590 Vehicle or Trailer Maintenance $0.66 $853,750 Race Entry Fees $0.19 $239,309 Feed (incl. Supplements) $2.41 $3,117,480 Wages $0.46 $591,280 Insurance $0.35 $452,746 Rent $0.37 $477,664 Gear & Accessories $0.46 $589,346 Trials $0.33 $426,875 Travel Expenses $0.78 $1,008,977 Administration Expenses $0.48 $622,670 Other Expenses $0.58 $750,206 Property Maintenance $0.39 $504,488 Capital Improvements $0.21 $271,648 Total Cost $13.74 $17,771,283

Source: Participant Survey conducted by IER

Trainers and owners spend more than $17.7 million on the preparation of greyhounds each year. This includes the proportion of profit that is generated by trainers (as this makes up part of the bottom line cost of production – albeit a cost to the owner.) Feed, Vets fees and travel expenses make up the largest components of their total spend. Property costs are considerably lower given that many trainers operate their activity out of training facilities added to their residence.

40

TBP.001.031.0041

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Proportion of Expenditure in Preparing Greyhounds

Capital Improvements 2.44%

Property Maintenance 4.53%

Other Expenses 6.73%

Administration Expenses 5.59%

Travel Expenses 9.05%

Trials 3.83%

Gear & Accessories 5.29%

Rent 4.28%

Insurance 4.06%

Wages 5.30%

Feed (incl Supplements) 27.96%

Race Entry Fees 2.15%

Vehicle or Trailer Maintenance 7.66%

Vets Fees 9.75%

Licence Fees 1.39%

0% 5% 10% 15% 20% 25% 30%

Source: Participant Survey conducted by IER

Data collected through the participant survey was used to estimate the direct employment generated by greyhound trainers. The economic activity undertaken by trainers in Queensland is estimated to sustain the paid employment of approximately 704 individuals (related to training activities). Based upon data provided by trainers relating to the average number of hours worked by their staff, the paid activity equates to 307 full time equivalent positions that are sustained by greyhound trainers in Queensland. This analysis indicates that the typical individual working in paid employment for a greyhound trainer does so for approximately 43.6% of a full time equivalent position – or just over 17 hours per week.

Across the three codes of racing, trainers and owners spend more than $349.4 million each year on the preparation of thoroughbreds, standardbreds and greyhounds for racing.

41

TBP.001.031.0042

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Figure 3 – Number of Trainers

42

TBP.001.031.0043

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

DRIVERS & JOCKEYS Drivers and jockeys are responsible for providing the expertise in piloting the horses around the track. They work long hours and often travel great distances to provide their specialist services to trainers and owners.

Jockeys and drivers contribute to the distribution of expenditure within the economy, however, not to the extent of trainers and owners. They are mostly limited to expenditure items such as their tools of trade (e.g. saddles, sulkies, whips and clothing) and travel expenses. Jockeys/drivers receive the majority of their income from prizemoney and riding fees.

The total number of riders (jockeys Total number of Jockeys in Jockeys and apprentices) has remained Queensland 5 Year Trend Apprentices consistent over the past five years. 250

In 2005/06 the thoroughbred 200 industry experienced a drop in the 150 number of senior jockeys; however this was offset by an increase in the 100 number of apprentice riders. In total 50 Queensland has approximately 270 - registered senior jockeys and 2003/04 2004/05 2005/06 2006/07 2007/08 apprentices. Source: Participant Survey conducted by IER

The total number of drivers in the Queensland harness racing industry has reduced marginally since 2003/04. The sharper decline in Total number of Drivers in Queensland Drivers 5 Year Trend 2007/08 may have been the result of the impact of equine influenza in 400 Queensland, where many drivers would 300 have gone without drives whilst the emergency was playing out. Unlike the 200 thoroughbred racing industry, many 100 trainers and owners also drive in both training the horses and in races. 0 2003/04 2004/05 2005/06 2006/07 2007/08 Drivers and jockeys earn their revenue Source: Participant Survey conducted by IER via a number of sources:-

• Some are paid on retainer by a trainer to ride for their stable • They receive a % share of prizemoney from their rides • Riding/Driving fee (both trackwork and races)

Jockeys and drivers provide a service to the industry (although they are often classed as participants) and as such, their expenditure in the racing industry in most cases is less than their revenue.

43

TBP.001.031.0044

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

OWNERSHIP IN THE QUEENSLAND RACING INDUSTRY Owners provide the capital investment which ensures that racing stock is continually replenished. Their involvement in the industry is often misunderstood as being purely about achieving a return on investment. IER’s survey of over 400 owners in the QRI revealed that only a small number of owners purchased racing animals as a pure investment. Whilst some owners do indeed maintain their involvement with the objective of making a healthy return on investment, the research showed that many owners see their involvement as mostly pleasure. They are in fact prepared to make a loss (within certain acceptable limits) in order to partake in this chosen pastime. This does not mean that they do not strive to make money; they are simply acknowledging that this is their alternative to having other pastimes such as sailing (requiring a boat) or buying a vacation house.

In many ways, the health of the owners in racing provides a picture to the broader health of the racing industry as a whole. When there are many owners in the industry, the pool of horses and greyhounds available for racing expands, leading to larger fields and indirectly, to larger betting pools. Trainers experience growth in their business, due to the increase in the number of animals in training and breeders yield greater revenues from the sale of their stock. It is estimated that there are more than 16,600 owners and 836 syndicates in the QRI. This consists of more than 13,200 owners of thoroughbreds, 1,640 standardbreds and 1,790 greyhounds.

Data received from a survey completed by more than 400 owners in the QRI revealed the following results: -

The typical thoroughbred owner: - . has owned thoroughbred horses for 13 years . owns horses in co-ownerships and partnerships (71.6%) . owns 3.9 horses in sole ownership and 2.4 horses in co-ownerships and partnerships . 33% of owners also breed horses . 52% of owners investment in horses has increased compared to 5 years ago

The typical harness owner: - . has owned standardbred horses for 19.5 years . owns horses in co-ownerships and partnerships (57.6%) and as sole owners (39.4%) . owns 4.6 horses in sole ownership and 3.3 horses in co-ownerships and partnerships . 45% of owners also breed horses . 55% of owners investment in horses has increased compared to 5 years ago

The typical greyhound owner: - . has owned greyhounds for 5.7 years . owns greyhounds as a sole owner (56%) and/or syndicate member (56%) . owns 2.1 greyhounds in sole ownership and 2.4 greyhounds as a syndicate member . 19% also breed greyhounds and 18% train greyhounds . 52% of owners investment in greyhounds has increased compared to 5 years ago

44

TBP.001.031.0045

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

OWNERSHIP CATEGORIES AND TRENDS

IER asked owners to identify the category in Current Ownership Category Greyhound Harness which they have an ownership interest. 80.0% Thoroughbred Thoroughbred owners were more likely to be 70.0% a co-owner or partner (71.6%) and/or sole owner (28%), followed by a syndicate 60.0% member (22%). Similar to thoroughbred 50.0% owners, Standardbred owners were predominately a co-owner or partner (57.6%) 40.0% and/or sole owner (39.4%). Greyhound racing 30.0% ownership is measured as either a sole owner and/or syndicate member. Greyhound 20.0% owners revealed that their ownership in 10.0% these categories was 56%, indicating that a number of these participants held ownership 0.0% in both categories. Sole Owner Co-owner or Leasing Syndicate partnership interest Member Source: Participant Survey conducted by IER The chart below illustrates a five years trend in the number of owners for the QRI between 2003/04 – 2007/08. Whilst the number of owners has been consistent over the last five years, thoroughbred and standardbred ownership has decreased overall.

Total number of Greyhound Owners and Syndicates in Queensland Greyhounds 5 Year Trend Harness Thoroughbred 16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

2003/04 2004/05 2005/06 2006/07 2007/08

Source: QRL, HRQ, GRQ

45

TBP.001.031.0046

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

One of the key strategic drivers for retaining and attracting owners is the level of returns being delivered to owners. As mentioned above, many owners have an ‘acceptable loss’ they are willing to assume, however any additional loss will determine if they will remain in the industry as an owner. It is important to note that both thoroughbred and harness racing were affected in 2007/08 due to the cessation of horse racing in Queensland for 4 months due to equine influenza. The thoroughbred sector has experienced significant growth (19% to 2006/07) in returns since 2003/04. The greyhound sector has grown by 8% in the five year period and the harness sector has grown by 3% in the four years to 2006/07.

Total returns to owners in Queensland Greyhound Harness 5 Year Trend (Millions) Throughbred $80 Mil

$70 Mil

$60 Mil

$50 Mil

$40 Mil

$30 Mil $20 Mil

$10 Mil

$0 Mil 2003/04 2004/05 2005/06 2006/07 Source: QRL, HRQ, GRQ

OWNERS MOTIVATIONS IER asked owners to suggest the key drivers that motivate their involvement in the racing industry. Understanding these drivers is important to growing the investment by current owners and increasing ownership in the non-owner segment. IER also assessed the current investment by owners compared to 5 years ago and future level of involvement in terms of maintaining, decreasing or increasing the size of their ownership portfolio.

Thoroughbred, harness and greyhound owners identified a number of motivating factors behind their participation in the racing industry. Overwhelmingly, owners were very passionate about their particular industry. The survey revealed that a significant proportion of owners in all codes ‘love the animal’ and the ‘thrill and excitement’ of ownership. Furthermore, many thoroughbred owners enjoyed ownership as a special interest or hobby with friends, whereas owners of greyhounds revealed an ownership interest through family involvement - ‘my father’s pups were divided between 5 children’. Harness racing owners were driven by both family involvement and special interest/hobby. Moreover, owners in all three codes communicated a strong connection with the animal and racing industry.

46

TBP.001.031.0047

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

IER’s survey of owners revealed that Current level of ownership Greyhound the majority of current owners (50% compare to 5 years ago Harness Thoroughbred -55%) in the QRI have increased their 60.0% investment in ownership compared to 5 years ago. The adjacent chart 50.0% illustrates the change in ownership 40.0% investment. Less than 20% of owners in the harness and greyhound sector 30.0% stated that the scale of their ownership has decreased, compared 20.0% to 25% for the thoroughbred sector. 10.0%

Looking forward to the next five 0.0% years however, increased returns to It has decreased It has increased It is about the same owners will be important, Source: Participant Survey conducted by IER particularly when considering the future intentions of current owners of thoroughbreds and standardbreds. IER asked owners if they intended to maintain, decrease or increase their level of ownership interest. Approximately half of all owners (55% Thoroughbred, 52% Harness and 55% Greyhound) intend to maintain their level of involvement in the racing industry. However, more thoroughbred and harness owners intend to reduce their ownership interest (T -28% and H-35%) than increase. Conversely, owners in the greyhounds sector are more likely to increase (29%) their involvement than contract (14%).

Future level of involvement in the racing industry Greyhound (Owners) Harness Thoroughbred 60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0% I intend to decrease my level of I intend to increase my level of I intend to maintain my level of involvement over the next 5 years involvement over the next 5 years involvement over the next 5 years

Source: Participant Survey conducted by IER

47

TBP.001.031.0048

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

The survey sought to understand the prevailing perception of owners regarding the sustainability of their involvement based on their current level of involvement. This is a topic which, in essence, is difficult to quantify exactly. Philosophically, research has shown that participants will always desire or aim for higher returns if asked about the adequacy of current return levels. An analysis of the investment perception of racehorse and greyhound owners in Queensland, revealed that the majority of owners do not perceive the current return on investment as motivation for their continued involvement in the racing industry. Does the return on investment motivate your continued activitiy in the industry? Greyhound Harness Thoroughbred (Owners) 80.0%

70.0%

60.0% 50.0% 40.0%

30.0% 20.0% 10.0%

0.0% Yes No Not sure Source: Participant Survey conducted by IER

It is important to acknowledge that research into ownership in horse and greyhound racing throughout Australia has revealed a strong sense of ‘pastime’ amongst much of the ownership market. In essence, this means that many owners look at racehorse and greyhound ownership as an activity along similar lines to owning a boat or a holiday house. The key difference however, is that there is the opportunity to make money doing so. However, various research studies have proven time and time again, that as long as owners are able to operate to their financial limitations (often a set level of losses – or investment – at the lower level) other factors such as opportunities to win prestigious races, do play a part in their continuing involvement.

EXPENDITURE BY OWNERS As discussed in the previous section, the owners pay a training fee, which is distributed by the trainer into the economy to prepare the racing animal. IER found that the training fee was the majority of the owner’s expenditure, however not all expenditure on preparing and maintaining the animal is undertaken by the trainer. Those expenses incurred directly by owners include major veterinary fees, agistment/kenneling, jockey/driver commissions and travel.

48

TBP.001.031.0049

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Owners also play an important part in the economic cycle of the racing industry through their investment in racehorses and greyhounds. Whilst this investment yields economic flow through to many parts of the industry, it is the breeding sector in particular which relies on this as a source of revenue used to offset their expenditure on the production of foal crops and litters. The following charts illustrate the auction results over the last five years in each code:-4

Horse Sales Trends - Thoroughbreds Lots Sold 2004- 2008 (Real $ - Base Year 2004) Sales Aggregate 4500 $250 4000 3500 $200 3000

$150 Millions 2500 2000 $100 1500

1000 $50 Number of HorsesSold Number 500 0 $0 2004 2005 2006 2007 2008 Source: QRL, HRQ, GRQ Over the last five years, thoroughbred sales at auction have been steadily growing – aside from the 2008 sales, which were affected by Equine Influenza.

HorseHorse SalesSales TrendsTrends --StandardbredsThoroughbreds LotsLots SoldSold 20042004--20082008 (Real(Real $$ --BaseBase YearYear 2004)2004) SalesSales AggregateAggregate 100100 $0.8$0.8

9090 $0.7$0.7 8080 $0.6$0.6 7070 Millions 6060 $0.5$0.5 Millions 5050 $0.4$0.4

4040 $0.3$0.3 3030 $0.2$0.2 2020 Number of HorsesSold Number Number of HorsesSold Number 1010 $0.1$0.1 00 $0.0$0.0 20042004 20052005 20062006 20072007 20082008

Source: QRL, HRQ, GRQ

Standardbred sales at auction have fluctuated over the last five years. 2008 recorded a decline in the number of standardbred sold at auction; however the average price rose, leading to an increase in total aggregate sales.

4 Dollar values have been converted to real dollar values using 2004 as the base year for inflationary purposes

49

TBP.001.031.0050

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Horse Sales Trends - Greyhounds Lots Sold 2004- 2008 (Real $ - Base Year 2004) Sales Aggregate 400 $0.8

350 $0.7

300 $0.6

250 $0.5 Millions

200 $0.4

150 $0.3

100 $0.2

50 $0.1

Number of Greyhounds Sold of Number Greyhounds 0 $0.0 2004 2005 2006 2007 2008 Source: QRL, HRQ, GRQ

The greyhound industry has been experiencing a serious decline in both units sold and aggregate sales revenue over the last five years. Revenue and the number of lots sold, have both halved since 2004.

50

TBP.001.031.0051

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

GOVERNING BODIES & RACING CLUBS IN QUEENSLAND The governing bodies of the three codes of racing in Queensland, namely Queensland Racing Limited (QRL), Harness Racing Queensland (HRQ) and Greyhounds Queensland Limited (GQL) are charged with the responsibility of maximising returns to owners through the development of long-term sustainable and profitable racing industries. Essentially they set, develop and implement the strategic direction of racing. Furthermore, they coordinate, manage and regulate the industry through a number of key functions. These include: -

• Administering the rules of racing • Enforcement of standards of safety and integrity • Licensing industry participants • Registering race clubs and monitoring their activities • Racecourse developments and capital works • Research and promotional activities • Administration of industry funding and commercial agreements: and • Representing the Queensland Racing Industry on peak national bodies within the three codes

The governing bodies assume the principal role in managing the health of the racing industry – overseeing major internal strategic issues such as product placement, track utilisation and major capital developments to external strategic issues including race fields legislation, external wagering operators (such as Betfair and corporate bookmakers) and events such as the outbreak of Equine Influenza.

Racing clubs fulfil the key roles of staging the racing and promoting their racing events and club membership opportunities to the community. In doing so, racing clubs provide the marketing, facilities, service and in many ways, the image of the entire industry.

After race dates are allocated each year, the club is then in charge of attracting people to attend their event, often through a mixture of racing and other entertainment products. The ownership structures for the land, premises, tracks and plant and equipment vary between club and code. Some racecourses share facilities between codes, while other smaller community racecourses co- exist with other sports and recreational activities.

Through attracting these customers to racing events, club expenditure is distributed into the economy through numerous channels. Clubs are funded through their governing bodies to meet the needs of large expenditure items such as prizemoney and capital requirements. However, clubs themselves generate significant revenue in terms of admissions, food and beverage, sponsorship and packaging.

51

TBP.001.031.0052

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

THOROUGHBRED CLUBS There are 136 thoroughbred racing Clubs in Queensland, which are split into two main categories - TAB clubs and Non-TAB clubs. There are 11 TAB racecourses (including the Sunshine Coast Cushion track) that run more than 400 race meetings and over 3000 races annually. The five clubs that make up the majority of these include the two major clubs in Brisbane, the Gold Coast, Caloundra and Toowoomba. The number of TAB clubs over the past 10 years has reduced from 17 in 1998 to 11 current venues.

There are 121 Non-TAB clubs, racing over 330 times annually. These meetings and clubs have strong linkages with the community and attract a more social and less formal spectator and participant. Non-tab clubs range from Texas in the south of the state to Laura in the north. The number of Non- TAB clubs has reduced approximately 10% in the last 10 years. Australian State Population vs Racing Clubs

State Population Thoroughbred Clubs 8 150 7 125 6 100 5 4 75 Millions 3 50 2 25 1

0 0 NSW VIC QLD SA WA TAS NT ACT Source: QRL, HRQ, GRQ, ABS Census HARNESS CLUBS There are 7 harness racing clubs in Queensland with 3 of these clubs holding TAB status, with the remaining 4 clubs being Non-TAB events. The 3 TAB venues are Albion Park, Redcliffe and the Gold Coast. These venues conduct over 250 race meetings and in excess of 2200 races annually. The number of TAB venues has reduced by 1 over the last 10 years; however the number of TAB meetings has increased by 25% over the same period.

Similar to the thoroughbred Non-TAB clubs, these venues have strong links to their communities. The four Non-TAB clubs race close to 100 times annually and supply over 500 races in the same period. Currently, Mackay and Rockhampton are not racing, which leaves Non-TAB racing at Marburg and Rocklea.

In more recent times the racing clubs in the Harness code have embarked upon a new ownership structure, whereby all venues including equipment is owned by or leased to a new company. This has realised a more commercial approach to the utilisation of these assets. The clubs (as licensees) are responsible for their membership and for participating in the race day events as organised by Commercial Operations. The key responsibility of the Clubs is to undertake the important role as stewards, a critical element of the social fabric that supports the industry.

52

TBP.001.031.0053

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

GREYHOUND CLUBS Greyhound racing in Queensland is split into three main categories: TAB race meetings, Non-TAB race meetings and trials. There are 9 greyhound racing clubs – 3 with TAB status and 6 Non-TAB. The 3 TAB venues race over 360 times per year and conduct close to 3600 races. There are currently two main TAB tracks operating at Albion Park in Brisbane and Ipswich. The number of TAB clubs has reduced from 5 to 3 over the past 10 years.

The remaining 6 Non-TAB clubs supply approximately 272 race meetings and over 2199 races for the Queensland greyhound industry. These venues include Bundaberg, Capalaba, Townsville, Cairns, Mackay and Rockhampton.

Number of racing clubs per region: -

Region Thoroughbred Harness Greyhound South East Queensland 21 5 5 Eastern Downs 21 - - Downs 15 - - Capricornia 19 1 1 Central West 13 - - Leichardt 18 1 2 North West Queensland 16 - - Far North Queensland 13 - 1 Total 136 7 9 Source: QRL, HRQ & GQL

Number of race meetings per region: -

Region Thoroughbred Harness Greyhound South East Queensland 203 309 460 Eastern Downs 57 1 - Downs 29 - - Capricornia 81 24 45 Central West 32 - - Leichardt 80 - 94 North West Queensland 35 - - Far North Queensland 46 - 40 Total 563 334 639 Source: QRL, HRQ & GQL (please note figures taken from 2006/07 racing season due to EI)

53

TBP.001.031.0054

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Figure 4 –Racing Clubs in Queensland

54

TBP.001.031.0055

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Racing Club Customers

One of the racing clubs primary roles is to provide a quality experience to on-course customers. In previous research, IER has found that many participants and loyal customers (both on and off- course) were introduced to the racing industry by experiencing the live racing product first hand. In order to compete in the entertainment market, racing clubs have invested in carnivals and themed events to attract new customers and improve the experience of existing clientele. Events such as these include the Nursery Pace, Queensland Winter Racing Carnival and the Winter Carnival Cup.

The three main codes of racing attract more than 1.43 Proportion of Customers by million attendances (not individuals) to racecourses each Code year. The chart adjacent illustrates the proportional Thoroughbred breakdown of attendances between the three codes. The Harness thoroughbred code attracts the highest number of on- Greyhound 67.0% 17.0% course customers, mainly driven by the carnivals and large quantity of community cup days. Over 60% of all racing 16.0% attendances are outside of Brisbane.

The latest Australian Bureau of statistics revealed that Source: QRL, HRQ, GRQ over 16.1% of Queenslanders visit racecourses annually. This placed the racing industry higher than other major sports including rugby league (16%), motor sports (11.9%) and AFL (7.4%). The following chart illustrates the number of individual person attending main sports in Queensland. Approximately 500,000 Queenslanders attended a racing event or a rugby league game. This was followed by motor sports (366,000), AFL (228,000) and rugby union (188,000).

The thoroughbred racing industry accounts for approximately 83% of individual visitors to racing. This is by far the highest proportion amongst codes, and is likely driven by the large geographic spread of clubs and the higher proportion of themed meetings. Individual visitation to harness meetings was 12% and for greyhound meetings 5%.

Persons Attending Main Sports in Queensland Greyhound Harness Thoroughbred in 2005/06 600

500

400

300

Thousands 200

100

0 Rugby Union Australian Rules Football Motor Sports Rugby League Racing Source: ABS Sports Attendance Survey

55

TBP.001.031.0056

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Racing Club Customer Spending

Expenditure by customers is generated both at the races and within the community as a result of their visit to the races. The major products purchased by customers at race meetings include; wagering, food and beverages, raceday admissions and packages.

The majority of event related race meetings occurs in the thoroughbred codes and therefore contributes to a significant portion of their raceday revenues. In the 2006/07 racing season raceday related revenues accounted for 22% of thoroughbred racing club income. This figure was significantly higher for thoroughbreds, and is most likely driven by events such as the Magic Millions Carnival and the high number of community/cup days throughout the state. Harness racing clubs accounted for 11% in raceday revenues and greyhound racing clubs 10%.

Many of these racing events inspire customers to spend not just at the races, but within the community. IER surveyed over 400 customers at event related meetings in the thoroughbred code at Eagle Farm (Brisbane), Gold Coast, Sunshine Coast, Toowoomba and Townsville in November 2008. The data collection from customers at these race meetings ensured that there was sufficient information to be able to extrapolate customer data across other event related meetings in Queensland. Spending items assessed included transport, accommodation, retail spending (inc. fashion and personal grooming) entertainment and hospitality. It is estimated that attendees at racing event days, during the 2006/07 racing season, were responsible for just more than $61 million in spending within the community across all codes.

RETURNS TO OWNERS The three governing bodies distribute returns to owners through prizemoney and various incentive and bonus schemes.

Thoroughbred Racing

Overall, the thoroughbred racing industry paid out in excess of $65.00 million in returns to owners in 2007/08. However, it must be acknowledged that this figure represents the equine influenza affected racing season – and as such, represents a level more akin to that paid out five years ago. Over the last five years, the average returns to owners has been $69.08 million.

Harness Racing

Overall, the harness racing industry paid out in excess of $11.19 million in returns to owners in 2007/08. Over the last five years, the average returns to owners has been approximately $11.92 million. The decline in the 2007/08 figures are likely to be in part, a representation of the challenges surrounding equine influenza.

Greyhound Racing

The greyhound racing industry paid out in excess of $7.53 million in returns to owners in 2007/08. A five year analysis reveals the average returns to owners is approximately $7.45 million annually.

56

TBP.001.031.0057

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

WAGERING IN QUEENSLAND Queensland racing, from a wagering perspective, is serviced by wagering operator UniTAB – which also provides wagering operations for South Australia and the Northern Territory. As holders of the wagering license in these States, UniTAB provides both pari-mutual and fixed odds betting.

Pari-mutual wagering is a system of betting on the races whereby the winnings are based on a pre- determined ‘take out’ rate. The ‘take out’ refers to the amount lost to the punter from the total betting pool. Therefore, after deducting the take out from the pool, the total amount bet is then divided amongst the winning bets made.

Fixed odds wagering is a system that is employed by bookmakers and more recently by totalisator operators such as UniTAB, where a punter can lay a bet and be guaranteed the odds regardless of any subsequent betting activity. The following table illustrates the value of wagering on Queensland thoroughbred, standardbred and greyhound racing5:-

Manner of Wagering Thoroughbred Harness Greyhound Total Turnover Turnover Turnover Turnover TAB Off-Course $332.63 mil $42.28 mil $55.60 mil $430.51 mil Totalisator On-Course (TAB Meetings) $37.89 mil $3.60 mil $7.61 mil $49.10 mil Totalisator On-Course (Non-TAB Meetings) $0.49 mil $0.08 mil - $0.57 mil Bookmakers On-Course (TAB Meetings) $62.12 mil $0.83 mil - $62.95 mil Bookmakers On-Course (Non-TAB Meetings) $5.68 mil $0.25 mil - $5.93 mil Bookmakers Off-Course $117.90 mil $7.36 mil $2.65 mil $127.91 mil Total $556.71 mil $54.40 mil $65.86 mil $676.97 mil Source: QRL, HRQ, GRQ More than $676.9 mil is wagered in Queensland on thoroughbred, harness & greyhound races held in the State. Of this amount, more than $480 mil is wagered with UniTAB. However, once Queensland betting on non local races is added to the UniTAB equation, total wagering turnover rises to more than $2,036 mil.

The following chart illustrates the total wagering turnover on racing by Queensland residents:-

Total Wagering Turnover by Queensland residents

2.0800 mil 2.0400 mil

2.0000 mil 1.9600 mil 1.9200 mil

1.8800 mil

1.8400 mil FY 04/05 FY 05/06 FY 06/07 FY 07/08

Source: QRL, HRQ, GRQ

5 Note: This does not include wagering on interstate or international product on with UniTAB in Queensland – often referred to as ‘off-course non local’

57

TBP.001.031.0058

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

The following chart illustrates the total wagering turnover levels for each code over the last seven years:-

Total Wagering Turnover by Queensland Residents Thoroughbreds Harness Each Code Greyhounds 1,600

1,400

1,200

1,000

800 Millions 600

400

200

- FY 01/02 FY 02/03 FY 03/04 FY 04/05 FY 05/06 FY 06/07 FY 07/08

Source: QRL, HRQ, GRQ

Once successful bets have been paid, the net wagering revenue is then shared between the racing industry, the State and Federal Governments and UniTAB. Based on a distribution agreement, revenue that is distributed to the racing industry is then shared between the three codes of racing.

The total net wagering revenue generated by the racing industry in Queensland was in excess of $328.5 million in 2007/08. This amount fluctuates in line with total wagering turnover. The State Government receives a share of this amount through their wagering taxes (technically, a portion is distributed to the federal government through GST on wagering; however this is subsequently redistributed back to the State). The racing industry received more than $128 million in net wagering revenue distribution in 2007/08, which was then split amongst the codes on a pre- determined distribution agreement. UniTAB retains the remaining amount, as the gross profit on their wagering operations.

58

TBP.001.031.0059

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

THE ECONOMIC IMPACT OF THE RACING INDUSTRY IN QUEENSLAND

The racing industry in Queensland generates economic impacts via a number of sources. The spending activity undertaken by those whose business is concerned with the preparation of racehorses stimulates the economy, in particular those businesses which supply goods and services to the horse industry. Racing customers spend money during the consumption of on-track goods as well as through the investment made on live and simulcast betting. Where major racing events are concerned, customers also spend considerable amounts of money in the community on retail and tourism activities. Whilst much of this impact represents a recirculation of money in the same economy, it does stimulate economic activity and in turn employment. In addition to this, the QRI also generates revenue through the sale of Queensland bred horses and greyhounds to non- Queenslanders. This is, however, offset somewhat by the leakage of money into other States and Territories associated with the purchase of non-Queensland horses and greyhounds.

It is important to understand what the measure of economic impacts means in terms of an industry such as racing. In particular, it is important to acknowledge what it is not:-

• It is not a measure of the loss to the economy if the racing industry were to cease its existence. If this were to happen, some or all of the expenditure in racing would be transferred to other activities in the economy • It is not a measure of the new money derived from outside of Queensland. It does however contain within its calculations, the spending by non local tourists and participants who bring their horses and greyhounds to race – and this is in its own right important.

The measure of economic impacts, within this size and scope study, is however a measure by which to acknowledge the relative size and importance of racing in Queensland. It is also a very useful measure in benchmarking overall industry growth over time.

A key element in undertaking an assessment like this is to provide an evidence based, quantifiable measure of the impact and importance of the different parts of the industry to the State. Anecdotal evidence is often used when illustrating the importance of the racing industry. This study dissects the complexities of the industry and assigns a value to it.

59

TBP.001.031.0060

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

ECONOMIC IMPACT OF RACING Analysis of the racing industry in Queensland reveals that it is responsible for the generation of more than $855.5 million each year in direct expenditure. The following chart illustrates the composition of this expenditure by racing code:-

Direct Expenditure Breeding Racing Animals Producing Racing Animals by Segment Racing Club & Peak Body Expenditure Customer Expenditure (Off Course) Net Wagering Revenue 100.0% 13.8% 90.0% 21.8% 80.0% 9.3% 6.9% 70.0% 54.4% 10.1% 15.8% 60.0% 50.0% 23.5% 6.1% 40.0% 43.4% 30.0% 13.1% 3.1% 20.0% 37.6% 10.0% 17.8% 23.4% 0.0% Thoroughbred Harness Greyhound Source: IER Calculations

The thoroughbred racing industry is responsible for just over $656 million (76.7%) of this recurrent expenditure. The production of racehorses (43.4%) and the wagering sector (21.8%) make up the largest component of its expenditure impact. The harness racing industry is responsible for just under $125 million (14.6%) of this recurrent expenditure. The breeding sector (37.6%) and the production/training sector (23.5%) make up nearly two-thirds of its expenditure impact. The greyhound racing industry is responsible for more than $74 million of this recurrent expenditure. Net wagering revenue makes up more than half of its expenditure impact (54.4%) followed by the breeding sector.

The following table illustrates the dollar value of expenditure impacts in the Queensland racing industry:-

Expenditure Area Thoroughbred Harness Greyhound Total Breeding Racing Animals $116.6 mil $47.0 mil $17.3 mil $180.9 mil Producing Racing Animals $285.1 mil $29.3 mil $2.3 mil $316.7 mil Racing Club & Peak Body Expenditure $66.3 mil $19.8 mil $9.7 mil $95.8 mil Customer Expenditure (Off Course) $45.6 mil $11.6 mil $4.5 mil $61.7 mil Net Wagering Revenue6 $142.9 mil $17.2 mil $40.3 mil $200.4 mil Total $656.5 mil $125.0 mil $74.1 mil $855.5 mil Proportion of the Industry 76.7% 14.6% 8.7% Source: IER Calculations

6 Net Wagering Revenue, for the purposes of economic calculations, refers to the component of revenue that excludes the distribution to the racing industry as this has been already considered within other sectors of the industry

60

TBP.001.031.0061

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Following the collection of industry expenditures, the data was subject to analysis in order to determine the aggregate effects within each relevant industry in Queensland. The following table outlines this impact:-

% of Direct % of Queensland ANZSIC Aggregations Queensland Expenditure Expenditure GSP GSP Agriculture, Forestry and Fishing $93.4 mil 10.0% $6,849 mil 1.36% Manufacturing $22.9 mil 2.4% $18,571 mil 0.12% Electricity, Gas and Water Supply $47.2 mil 5.7% $3,756 mil 1.26% Construction $56.8 mil 6.1% $18,189 mil 0.31% Wholesale Trade $30.7 mil 3.6% $9,574 mil 0.32% Retail Trade $63.7 mil 8.2% $14,111 mil 0.45% Accommodation, Cafes and Restaurants $24.6 mil 3.8% $5,312 mil 0.46% Transport and Storage $9.6 mil 1.1% $13,154 mil 0.07% Communication Services $29.1 mil 4.3% $3,854 mil 0.75% Finance and Insurance $62.4 mil 7.4% $9,944 mil 0.63% Property & Business Services $130.6 mil 15.4% $21,504 mil 0.61% Education $13.2 mil 2.1% $8,216 mil 0.16% Health & community Services $13.3 mil 1.6% $12,606 mil 0.11% Cultural and Recreational Services $169.9 mil 19.5% $2,493 mil 6.82% Personal and Other Services $88.1 mil 8.9% $4,076 mil 2.16% Total Direct Expenditure $855.5 mil 100.0% $180,824 0.47% Source: IER Calculations, ABS The total direct expenditure impact generated by the racing industry in Queensland equates to 0.47% of total GSP. The Cultural & Recreational Services sector generates the largest proportion of total sectoral expenditure (6.82%), followed by Personal and Other Services (2.16%) and agriculture, forestry & fishing (1.36%). 7

In order to estimate the flow on impacts of this expenditure, it is first necessary to adjust the spending for margins, taxes and imports (inter-regional trade). Some of the expenditure items may be subjected to taxes such as GST. Front-end taxes must be accounted for before determining the flow on effects throughout the economy.

After taking into account these adjustments within the economic model, the following table illustrates the economic outputs generated by the racing industry:-

ECONOMIC IMPACT Thoroughbred Harness Greyhound TOTAL Racing Racing Racing Real gross value added (GSP) ($m) $1,145.09 $202.55 $95.95 $1,443.59 Real consumption ($m) $410.30 $78.12 $46.32 $534.74 International exports ($m) $188.48 $21.06 $14.57 $224.11 International imports ($m) $217.14 $24.26 $16.80 $258.20 Source: IER Calculations The Queensland racing industry generates $1.44 billion in value added contribution to Gross State Product.

7 Figures based on current (nominal) prices

61

TBP.001.031.0062

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Real gross value added is the generally accepted measure of the value of production from economic activity. It is the sum of value added by all industries in a region (in this case, the State of Queensland). In any period of time, the value added in an industry is essentially, the value of sales less the value of inputs used in production. This means value added is equal to the income (wages, salaries and profits) generated in production. The real gross value added calculation uses constant prices (prices in a selected year), hence it does not allow for general price level changes (inflation). Also, the calculation makes no allowance for capital used in production (depreciation). As can be seen in the table on page 60, the QRI in Financial Year 2007/08 added $1.44 billion to Gross State Product (GSP). This represents 0.80% of Queensland’s real GSP for 2007/08. 8

Real consumption is a commonly accepted measure of the welfare of private residents. It measures household expenditure on durable and non-durable goods and services which is largely depended on income (value added). The economic activities associated with the QRI led to an additional $534.7 million of real consumption for Queensland residents. This is less than the real gross value added, reflecting the fact that some income is saved and not all of the income generated by the QRI accrues to Queensland residents (eg. Profit repatriated outside of Queensland and taxation).

TAXATION REVENUE GENERATED BY HORSE & GREYHOUND RACING IN QUEENSLAND The activities of the racing industry generate more than $140.7 million in taxation revenue for the State and Federal Government. The following chart illustrates the taxation revenues generated:-

Taxation Revenue Generated Federal & Provincial

$120.00 Mil

$100.00 Mil GST $54.73 Mil $80.00 Mil

$60.00 Mil

$40.00 Mil Wagering Taxes $35.85 Mil $20.00 Mil Stamp Duty $36.88 Mil $4.28 Mil Payroll Tax $0.00 Mil $9.03 Mil State Government Federal Government Source: IER Calculations

8 Note: Economic impacts derived from the MMRF model refer to ‘real’ impacts. This means that the figures are based on constant prices to ensure comparability. A deflationary factor as applied to current prices to make them comparable to past prices.

62

TBP.001.031.0063

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

The State Government receives more than $103.9 million in taxation revenue from the Queensland racing industry. The majority of this revenue is generated from GST and wagering taxes. Whilst income tax and GST are not taxes paid specially by the racing industry (i.e. if the racing industry did not exist, these people would still be paying these taxes elsewhere), the $35.8 million contributed from wagering tax is unique.

The Federal Government receives just over $36.9 million in taxation revenue from the Queensland racing industry, from income taxes generated by those employed directly by the racing industry. The importance of wagering taxation revenue cannot be understated. A decline in the racing industry’s success has a direct and immediate impact on the level of taxation revenue generated. A decline in the level of wagering turnover would have a dramatic and immediate impact on this revenue stream (as would growth in wagering turnover in the opposite manner). The high churn levels associated with wagering on horse and greyhound racing is a key driver behind the accumulation of such significant taxation revenues.

The exact level of taxation revenue generated from stamp duty and payroll tax are nearly impossible to determine through a data collection process of this sort. However, through the assessment of taxable asset purchases and the wage bill of individual entities likely to trigger a Payroll Tax event, these estimates represent conservative estimates of the revenue from these taxes.

The calculation of GST revenue may account for the fact that not every purchase is subject to GST and the data has been adjusted accordingly.

The calculation of income tax has been based on a marginal tax rate of 30% across the board. This was considered to be a responsible approach given the high level of part time and casual employment sustained by the racing industry.

EMPLOYMENT SUSTAINED BY HORSE RACING IN QUEENSLAND The racing industry in Queensland sustains 18,580 FTE jobs, with more than 61% being directly involved in the core racing industry. The following table illustrates the employment levels sustained by each code:-

EMPLOYMENT IMPACT Thoroughbred Harness Greyhound TOTAL Racing Racing Racing Employment Impact (FTE) 14,770 2,016 1,800 18,586 % of Employment 79.5% 10.8% 9.7% Source: IER Calculations Furthermore, the investment in the racing industry – in terms of time, emotion and money – positions participants in this industry as a transient sector of the economy. This means that if the racing industry declines to certain levels of activity and sustainability in Queensland, participants are likely to relocate their residence and livelihood to another racing province.

When considering employment from a State perspective, it is important to not only consider the FTE impact of the racing industry, but also the total employment impact (in terms of employed individuals) at all levels.

63

TBP.001.031.0064

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Whilst there are 18,580 FTE positions sustained in the economy – this equates to more than 29,500 individuals who derive an income from racing in full time, part time or casual employment. Racing clubs, peak body associations, breeders, trainers and wagering operators directly employ more than 16,300 individuals. This equates to just under 12,000 FTE positions. Furthermore, indirect industries (i.e. those who are not directly within the ‘core racing industry’) are estimated to provide paid employment for more than 13,100 individuals. This equates to approximately 6.580 FTE positions.

The employment impact of the racing industry is a vital component of its importance to the State. For every $21,000 of expenditure generated by the racing industry, an individual is gainfully employed in a full time, part time or casual position. An alternative and perhaps more economically sound way of looking at this is that for every $1 million of expenditure generated by racing activity, 22 FTE positions are created.

64

TBP.001.031.0065

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Figure 4 – Key Economic Impacts

65

TBP.001.031.0066

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

SOCIAL IMPORTANCE OF RACING The Queensland Racing Industry makes a significant contribution to community and social benefit, enhancing individual and community well being throughout the state. Whilst the racing industry is a sport, leisure activity, hobby or pastime in many communities, it is also a window to their history and an important community icon.

During this industry Size and Scope Study, a Social Impact Survey of Queensland racing clubs was conducted. The information gathered from this survey was assessed in conjunction with racing participation data, to establish the extent of community social benefit generated by racing in Queensland.

The racing industry was evaluated according to a range of community social benefit indicators, in a number of areas that are considered critical to the wellbeing of individuals and the communities in which they live.

The evaluation highlighted the racing industry’s significant role in the critical areas of:

• Community building – building inclusive and welcoming communities featuring powerful collaborative partnerships and relationships • Family – providing opportunities for family participation in racing which develops stronger family relationships • Education and training – supporting the education, training and development of participants and race club staff and volunteers • Health – commitment to policies that support priority community health objectives • Leisure – providing enjoyable leisure opportunities for hobby owners, trainers and breeders, race day customers and other race club event attendees • Employment – creating a major source of employment and a variety of career opportunities for the Queensland community • Environment – adoption of many environmentally friendly practices that support Government and community expectations relating to the protection of the Queensland environment

IER has collected information from multiple sources in order to analyse the social importance of racing. Methods of data collection include interviews, race club surveys and researching relevant literature. To gather data from the 150 racing clubs in Queensland, IER designed a quantitative and qualitative survey utilising an on-line survey approach. The survey was sent directly to the CEO/secretary or President of the racing club. IER received a sample of 62 completed surveys from the three codes of racing, ranging from major racing centres to regional and rural clubs.

The survey indicated that the racing industry has taken responsibility for a ‘triple bottom line’, producing economic, social and environmental benefits for Queensland. The racing industry is contributing significantly to key community objectives whilst also achieving industry goals for racing stakeholders.

66

TBP.001.031.0067

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

COMMUNITY BUILDING Racing Clubs have intrinsically developed practices and adopted policies that engage and develop the community through partnerships, relationships and volunteerism. The survey indicated positive initiatives undertaken by clubs including: -

• Over 405 community organisations or charities are assisted financially by racing clubs • Special community groups are invited to an average of three (3) racing events per year. • Over 3,525 corporate suppliers, sponsors and commercial partners engage with racing clubs • Over 290 community organisations share the racing club facilities and resources • Over 64% of multicultural groups and 53% of indigenous groups are pro- actively supported by racing clubs • Racing clubs engage with over 610 community organisations and not-for-profit organisations • Racing clubs currently engage more than 2170 volunteers who participate in the club

Racing plays an important role in fostering a sense of worth and belonging to a large number of racing volunteers in Queensland. The clubs that make up the QRI attract over 2170 volunteers. This is because of its direct link with the community (both economic and social) and the individual’s passion for racing. Volunteers assume roles such as administration, hospitality, racing operations and preparations for raceday.

With large and restricted use of their facilities, the majority of racing clubs have engaged with community organisations to share their facilities and resources. Some of the 290 organisations identified by clubs include: -

• Laeukemia Foundation • School Parent & Children • Breast Cancer Foundation • Junior Rugby League • Queensland Blind Society • Queensland Ambulance • RSPCA • Home & Community Care • Land Care Group • Royal Australian Air Force • District Sports Association • Abused Child Trust • Rural Fire Brigade • Hospital foundation

In addition to the above-mentioned community organisations, IER found that racing clubs financially assist over 400 community organisations and charities. Club organised functions raise significant funds for community organisations and charities through raffles and auctions. Furthermore, many

67

TBP.001.031.0068

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

regional clubs engage local community organisations and charities to undertake such activities as supplying food and beverages, operational duties (gate attendants), racecourse cleanliness etc. Some of the 405 organisations/charities identified by clubs include: -

• Royal Flying Doctor Service • Riding for Disabled • Angel Flight • Hospital Auxiliary • Hear and say centre • Lions Club • Returned Services League • Apex Club • Scouts & Guides • Variety Club of Queensland • Catholic College • Girl Guides • Surf Life Sailing Club • Rotary

SUPPORTING FAMILY RELATIONSHIPS Racing Clubs have increasingly developed activities and facilities that enable families to enjoy a great day out. Many clubs actively promote services and amenities for families including parents room, baby change tables, jumping castles and rides, giveaways and live stage shows etc. These events have the ability to bring families together to build stronger family relationships. The survey indicated positive initiatives undertaken by clubs including: -

• Over 55% of clubs offer special discounts for family group attendance. • 20% of clubs offer a junior membership with an average of 75 members per club • Over 37% of clubs offer events for families and children on non-racedays • Examples of activities and attractions available include: - . Children’s “fashions on the Field” . Face painting . Pony rides . Play grounds . Children's entertainers . Sports and tennis courts . Children's Activity Centres

IER’s survey of owners and trainers identified ‘building stronger family relationships’ as a driver to owning/training racing animals. Racing a horse or greyhound can bring together both family and friends to enjoy an interest in racing and can create a strong social environment. One greyhound trainer identified that he had “an interest in training, owning and breeding shared by my wife, myself and 3 professional sons”.

68

TBP.001.031.0069

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

EDUCATION AND TRAINING Racing Clubs and participants directly employ staff on a full-time or part-time basis. Raceclub employees are involved in running the club, the conduct of racedays and other activities on non- racedays. As a commitment to delivering an enjoyable experience for racing participants and customers, race clubs have adopted a number of initiatives.

• On average, each club has 2 members of their staff participating in further education, career development and training programs • Over 70% of clubs have policies and practices in place to teach and encourage responsible gambling • A quarter of clubs (24%) have partnerships with primary, secondary, trade and tertiary institutions • A third of clubs (31%) have placements available for work experience students at their racing clubs

Participants in the industry have access to the Queensland Racing Industry Training Centre, which was established in 1995 to meet the training needs of the three codes of the Queensland Racing Industry. In 2004 Queensland Racing assumed direct responsibility for the delivery of training in the thoroughbred code and became a Registered Training Organisation (RTO). Queensland Racing is responsible for delivering a variety of courses to the thoroughbred and harness codes of the Queensland Racing Industry. These services include: -

• Stablehand • Track work rider/driver • Stable foreman • Jockey

The racing industry has the ability to offer modestly skilled and underprivileged residents the opportunity to involve themselves in meaningful pursuits. Many stables, kennels and breeding farms are supported by many volunteers and employees on the minimum wage – their input not only provides valuable support to the trainers and breeders in Queensland, but also helps to keep these people occupied.

PROMOTING HEALTHY ENVIRONMENTS Public health is an important issue in every community worldwide. IER found that Queensland race clubs are committed to providing a healthy environment for their employees and customers. Furthermore, many participants (specifically in the greyhound sector) revealed that exercise, from training greyhounds, formed part health program.

69

TBP.001.031.0070

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Examples of practices revealed by Racing Clubs include: -

. Over 85% of race clubs provide healthy choice options for both racing participants and customers . Over 80% of race clubs have OH&S policies and practices in place to reduce health risks to participants, volunteers, staff and customers . All clubs have policies and practices in place to encourage responsible consumption of alcohol . 80% of clubs have policies and practices in place to reduce the consumption of tobacco. All clubs have non-smoking areas and 80% of clubs have advertising messages to quit smoking . Over 50% clubs have policies and practices in place to reduce the risk of cancer – examples include access to shaded areas, provision of sunscreen etc . Over 20% of clubs have partnerships with health bodies and associations. . Over 85% of clubs have trained on-site medical staff available to assist participants, volunteers, staff and customers if required

As mentioned above the greyhound racing industry in Queensland has inspired many participants to begin training and owning greyhounds for both the need (in many cases medical reasons) and desire to undertake physical activity. Some participants comments included: -

“A sport that I love and enjoy the physical exercise involved”

“I had to walk due to an accident and have always had a love of dogs, so I got my first greyhound, since then I have bred raced and won many races.

“As I am a diabetic - I walk the dogs daily for exercise”

Race clubs manage major facilities and events involving large numbers of customers. Community and Government expectations on race clubs relating to environmentally friendly practices and policies, have led to the adoption of a number of important initiates that have a positive impact on the Queensland environment.

Race clubs are actively implementing policies and practices in key areas that impact on the environment. These include:

. Over 65% of clubs have programs in place for water saving and re-circulating e.g. regular maintenance of plumbing, minimal or dual flush toilets, rain water tanks, overnight sprinklers, minimal watering of outer sports fields, removal of auto flushing urinals and composting and mulching of gardens . Over one-third of clubs have programs to develop native flora and fauna development e.g. tree planting in sensitive areas, pest eradication programs and preference for native indigenous plants . 20% of clubs have programs in place to reduce or re-use resources and recycling of waste such as glass bottles, aluminum cans and food scraps

70

TBP.001.031.0071

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

THE HISTORICAL IMPORTANCE OF RACING IN QUEENSLAND There are few sports that can match the rich cultural and social significance and heritage of thoroughbred, harness and greyhound racing in Queensland. The historical elements of the racetracks in Queensland are an important part of the fabric of many local communities. These racecourses and clubs are the focal point for the achievements of some of Australia’s great sportsmen and racing identities.

Thoroughbred racing in Queensland dates back to 17 July 1843, when the first official race meeting of the ‘Moreton Bay Race Club’ was conducted at the new racecourse on Coopers Plains; the year the first free settlers arrived in Brisbane. The race meeting was held over three days with the main race the Brisbane Town Plate valued at 50 pounds. Only 2 years later the racecourse was relocated to ‘New Farm’ and in June 1950 the first races were held at Ipswich. Soon after racing was established at Dalby and then racing spread to many towns throughout the colony. Queensland currently boasts over 135 racecourses. Ref: The History of Australian Thoroughbred Racing (Vol 1)

Queensland has provided some of Australia’s most recognised national icons, including Bruce McLachlan, Mick Dittman and George Moore. The likes of Champion Queensland horses - Bernborough, Gunsynd, Strawberry Road and Vo Rogue - have also become entrenched in the hearts and minds of all Australians.

The first greyhound coursing meeting was held in Queensland at Allora on the Darling Downs in 1893, two years after the national coursing association of NSW was established. In 1901 the Waterloo Cup was staged at Pittsworth and from 1908 greyhound racing was staged at Eagle Farm racecourse, Brisbane. In 1923 the Brisbane Cricket ground hosted night racing and between 1949 and 1985 a significant number of greyhound clubs were established around Queensland. Many of these include: Beenleigh, Capalaba, Southport, Ref: Greyhounds Queensland Limited Gold Coast, Cairns, Mt Isa, Bundaberg and Toowoomba. Queensland has produced many champion greyhounds including Flying Amy (pictured below) and Bogie Leigh.

Flying Amy Ref: Greyhounds Queensland Limited

71

TBP.001.031.0072

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Harness Racing commenced in Queensland at the Brisbane Showgrounds in 1876 and commenced at Eagle Farm on 8th November 1888. The first electric light race meeting (night race meeting) was held in 1911 at Wolloongabba. This special event included activities for the children and monkeys riding on horseback. Many harness racing tracks opened throughout the state including Goodna, Breakfast Creek Sports Ground, Virginia Ref: Albion Park Harness racing Club Park, Mackay and Kedron Park and in 1957 Redcliffe.

Queensland harness racing has provided many nationally recognised horses and participants. The latest being Natalie Rasmussen and three time Inter Dominion (Hobart, Adelaide and Melbourne) winner Blacks a Fake. Other notable horses and participants include Talmoi, Cloncurry, Airstream, David Belmont, Cecil Bennett and Rod Belford.

Ref: Albion Park Harness racing Club

S OCIAL IMPACT – GREYHOUND ADOPTION PROGRAM The Greyhound Adoption Program (GAP) demonstrates initiatives undertaken by the racing industry that deliver key community objectives whilst also achieving industry goals for racing stakeholders. GAP or the Greyhound Adoption Program, commenced in Queensland in 1998 and in that time has adopted over 500 greyhounds to families within the community.

After finishing their racing career, these greyhounds are provided with suitable, long-term homes where they are well cared for and enjoyed as a pet. All greyhounds are assessed by the GAP program staff and volunteers for suitability and integration as a family pet. In addition to this, the program provides long-term support and guidance for both the greyhound and its owners.

The program itself aims to educate the public about the positive attributes of the greyhound and remove any misconceptions and mistaken views that some sectors of the community may have. Furthermore, the program encourages a positive image of the greyhound to stimulate potential owners and future engagement within the greyhound racing industry in Queensland. Ref: Greyhounds Queensland Limited This racing season GAP is aiming to adopt close to 200 dogs in Queensland. These dogs are prepared by over 80 eighty volunteers (60 in Brisbane and 20 in Townsville). Furthermore, GAP has over 70 foster carers – these volunteers help the greyhound adjust to life as a "pet." These people play a vital role in helping GAP make sure that the right dog goes to the right home. These 150 volunteers are the backbone to the GAP program and bestow a level of care marked by consideration, compassion and tenderness towards the greyhound.

72

TBP.001.031.0073

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

STATE TAXATION REGIMES In preparing this study, IER has compared the taxation and funding models for each racing jurisdiction in Australia. Most racing jurisdictions in Australia have completed or are currently working with government to establish a sustainable racing industry that has economic and social benefits for government and stakeholders. These include: -

1. The Victorian Racing Industry (VRI) is currently working with the State Government to formulate a new funding model once the joint venture agreement with Tabcorp ceases in 2012. Currently, the VRI receives benefits in the order of $80 million per year from Tabcorp gaming revenue. This revenue will be withdrawn and a new model developed to ensure the VRI is not disadvantaged. A report by Ernst and Young commissioned by the three codes of racing in Victoria recently reported that taxation on wagering in Victoria could fall to as low as 2.55% if the racing industry is to be “no worse off”. 2. The three codes of racing in NSW have all provided submissions to the NSW Office of Liquor, Gaming and racing in relation to the review of wagering in NSW – the Cameron Report. One recommendation in the Cameron Report is a national co-ordinated approach to the regulation and taxation of the wagering industry. Proposed changes to the state taxation which affects the NSW Racing industry forms part of the submissions. 3. The South Australian Government has recently abolished all state taxation on racing. The South Australian Racing Industry has been the major beneficiary as it will be in receipt of approximately $8.5 million (per annum) of additional revenue commencing in the 2012/13 fiscal year. The process of the totalisator tax withdrawal is to be incremented over a four year period from 2008/09 through 2011/12. 4. The newly formed Tasmanian Racing Board is currently working with the Tasmanian government to formulate a new funding model that delivers sustainability and revenue predictability for the Tasmanian racing industry, funding for an appropriate level of capital works and funding to enable the Tasmanian Racing Board to develop the Tasmanian racing product. Similar to Victoria, the state Government has guaranteed that the Tasmanian Racing Industry will not be worse off by these arrangements. 5. Over the past four years the Western Australian Racing Industry has received significant capital support from government ($20 million over 3 years) and received a reduction of 5% State Tax on total turnover. The Western Australian Racing Industry has a distinct advantage compared to other jurisdictions when it comes to competing for the entertainment and gambling dollar, as electronic gaming machines (1750 in total) are only located within the Burswood Casino. 6. Similar to Tasmania, the Northern Territory Racing Industry is currently negotiating with the state Government in relation to a new funding model, which is not based on wagering turnover or net wagering revenue. It is estimated that the negotiation on the new funding arrangements will be complete in the coming months. Government revenue from wagering in the Northern Territory is significantly enhanced by the growth in corporate bookmaker turnover (in excess of $2 billion), of which the state government receives 0.33%.

73

TBP.001.031.0074

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

different 79%

- 9.09% 11.91% As above RWWA (currently 16.9%) wagering revenue wagering Western Australia Varies due to to due Varies 11.91% State Tax on net on net Tax State 11.91% commission on bet types bet on types commission on total turnover (which also also (which turnover on total Recently reduced 5% State Tax Tax State 5% reduced Recently carried a 0.5% rebate), down to to down rebate), a 0.5% carried

5%

below

9.09% 19.11% Victoria See See below See (currently 16.1%) to as as low 2.5 Varies due to different different to due Varies commission on bet types bet on types commission VRI receives 25% of Tabcorp Tabcorp of 25% receives VRI Gaming and Wagering Profits Profits Wagering Gaming and are currently negotiating with with negotiating currently are after the payment of taxes. VRI VRI of taxes. payment the after Government to reduce state tax

State Taxation Regimes Taxation State

Cameron Cameron

43% NSW 9.09% 19.11% 28.50% (approx 16%) taxation on racing taxation a Glance –

Varies due to different different to due Varies commission on bet types bet on types commission NSWRI provided the NSW NSW the provided NSWRI to form part of the At Government with a submission a submission with Government enquiry into wagering in NSW in in NSW in wagering into enquiry November 2008 to address state state address to 2008 November

41% 39% 16% 9.09% 10.91% Queensland

Net wagering Revenue wagering Net State Tax Federal Tax TAB Racing Industry Notes

74

TBP.001.031.0075

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

0.00% 9.09% Tasmania (June 2009) (June Tabcorp pools Tabcorp (currently 16.1%) (currently Varies due to different Approx 20% to link with commission on bet types Tasmanian Racing Board is is Board Racing Tasmanian contract with Government currently negotiatinga new Fee negotiatedFee with TAS Govt

a new contract 16% 60% 2009) 9.09% 30.91% Northern Territory Northern NT racing is currently with Government (march negotiating Fee negotiatedFee with NT Govt State Taxation Regimes Taxation State

a Glance –

At 41% 39% 16% 9.09% 10.91% South Australia the next fourthe year period racing will be abolished over State GovernmentState taxation on

Net wagering Revenue State Tax State Federal Tax TAB Racing Industry Notes

75

TBP.001.031.0076

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

QUEENSLAND

CURRENT WAGERING TAXATION REGIME UNITAB hold the license to conduct off-course totalisator betting in Queensland. UNITAB must return no less than 84% to punters. The remaining 16% is net wagering revenue, which is distributed in the following manner:

Retained by UNITAB 6.56% (41% of net wagering revenue)

Distributed to Racing Industry 6.24% (39% of net wagering revenue)

Federal Tax (GST) 1.45% (9.09% of net wagering revenue)

State Tax 1.75% (10.91% of net wagering revenue)

Total 16% 100%

The 39% allocation to the three codes is distributed through an inter-code agreement. This agreement forms part of the Product and Program Agreement, which is a tripartite agreement administered by Product Co. The percentage share between the codes is a fixed amount of 76% to thoroughbred, 14.5% to harness and 9.5% to greyhounds.

The total State Government Tax (Wagering Act – 1 July 1999) of 20% of net wagering revenue includes the Commonwealth Government Goods and Services Tax (GST). This GST is refunded to the State Government by the Commonwealth Government.

Between 2001/02 and 2005/06 TAB turnover on racing in Queensland has increased from $1.55 billion to $1.93 billion. This figure includes both on-course and off-course pari-mutuel betting.

UNCLAIMED DIVIDENDS All unclaimed dividends with respect to off-course and on-course wagering belong to UNITAB. UNITAB also retains the benefits from fractions when dividends are rounded down. Unclaimed dividends on bookmakers are retained by the bookmakers.

BOOKMAKERS Queensland bookmakers under an agreement with the Racing Industry in 2000 paid 0.33% of their gross turnover as revenue to the Club conducting the meeting. There are no State Government taxes on Bookmaker operations. There are no off-course bookmakers in Queensland.

CAPITAL SUPPORT Following the termination of the Racing Development Corporation, the Queensland government has abolished the Capital development fund; however Racing Queensland receives an annual $2 million payment towards the maintenance of training tracks. Harness and Greyhound Racing Queensland receive no direct capital funding from the Queensland Government. The Magic Millions Carnival on the Gold Coast receives a grant of $600,000 per year from Queensland Events. Furthermore, the

76

TBP.001.031.0077

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Queensland government provides six community race meetings with $5,000 per raceday under the Queensland Community Racing Scheme.

ELECTRONIC GAMING MACHINES The Queensland Racing Industry does not receive any income from gaming machine revenue collected by the Queensland state government. There are no racing clubs in Queensland that own gaming venues. The state's pubs and clubs have 41,527 operational EGM’s and the estimated loss by Queenslanders is just over $2 billion a year to gaming machines. On 21 April 2008 Queensland Premier Anna Bligh imposed a two-year moratorium on new gaming machines in the state. The discount rate applied to EGM in the states four casinos was abolished on 9 December 2008 raising the QLD govt an additional $36 million per year.

Between 2001/02 and 2005/06 turnover on EGM’s in Queensland has increased from $26.13 billion to $70.22 billion.

SPORTS BETTING The Queensland Racing Industry does not receive any benefit from Sports betting in the state. UNITAB administers fixed odds betting for thoroughbreds, harness and greyhounds. The government receives 20% of net wagering turnover.

Between 2001/02 and 2005/06 turnover on Sports Betting in Queensland has increased from $8.5 billion to $15.9 billion.

CASINOS There are four Casinos in Queensland: Conrad Treasury in Brisbane with over 1300 gaming machines, Conrad Jupiters on the Gold Coast with over 1300 gaming machines, The Reef Hotel Casino in Cairns with over 500 gaming machines, and Jupiters Townsville Hotel and Casino with over 400 gaming machines.

APPROACHES FOR LEGISLATIVE CHANGE There have been no recent approaches for legislative change.

77

TBP.001.031.0078

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

NEW SOUTH WALES

CURRENT WAGERING TAXATION REGIME Tabcorp holds the license to conduct off-course totalisator betting in NSW. Prior to 1st July 2007, net wagering revenue was capped at 16%. Following a change in legislation, the 16% cap was removed so that net wagering revenue would be determined by the proportion of bet types within the pool, with no bet type to exceed 25% take out rate. The commissions applying to wagering events ranging from 14.25% ‘place bet’ to 25% for exotic bet types. The retained commission (approx. 16%) is net wagering revenue and is subject to a state government tax of 19.11% and 9.09% federal GST. Net wagering revenue is distributed in the following manner:

Retained by Tabcorp 43%

Distributed to Racing Industry 28.5%

Federal Tax (GST) 9.09%

State Tax 19.11%

Total 100%

The distribution of funds between the three codes is governed by the Inter-Code Distribution Model in NSW. Under this agreement, funding is distributed on fixed percentages – 72% thoroughbred, 15% harness and 13% greyhound. Between 2001/02 and 2005/06 TAB turnover on racing in New South Wales has increased from $3.91 billion to $4.26 billion.

UNCLAIMED DIVIDENDS All unclaimed dividends with respect to off-course and on-course wagering belong to Tabcorp. Tabcorp also retains the benefits from fractions when dividends are rounded down. However these are taxed at the above-mentioned government tax rates. Unclaimed dividends on bookmakers are retained by the bookmakers.

BOOKMAKERS There is no taxation applied by the NSW government, however the racing industry can set levies for bookmakers to pay. Between 2001/02 and 2005/06 bookmaker turnover on racing in New South Wales has increased from $475 million to $582 million.

CAPITAL SUPPORT There is no specific allocation from government to industry for capital or other grant. However, the NSW thoroughbred industry will receive $2 million per year for the next 3 years for the development of the reinvigorated Autumn Racing Carnival.

78

TBP.001.031.0079

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

ELECTRONIC GAMING MACHINES The NSW Racing Industry does not receive any income from gaming machine revenue collected by the NSW state government. There are over 1330 registered clubs earning profits from EGM in NSW, with over 73,000 authorised EGMs. The EGM’s provided the NSW Government with $661 million in tax in the year ending May 2007. Between 2001/02 and 2005/06 turnover on EGM’s in NSW increased from $42.8 billion to $56.5 billion.

SPORTS BETTING Fixed Odds betting and sports betting is taxed at a rate of 10.91% net of GST or 20% inclusive of GST of net wagering revenue.

CASINOS There is one casino in NSW which is Star City owned by Tabcorp with over 1500 gaming machine and gross gaming revenue of $660 million.

APPROACHES FOR LEGISLATIVE CHANGE The three codes of racing have all provided submissions to the NSW Office of Liquor, Gaming and racing in relation to the review of wagering in NSW – the Cameron Report. Proposed changes to the state taxation on racing forms part of the submissions by the NSWRI.

79

TBP.001.031.0080

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

VICTORIA

CURRENT WAGERING TAXATION REGIME Tabcorp holds the license to conduct off-course totalisator betting in Victoria until 2012. Tabcorp is currently returning just under 84% to punters. Tabcorp can take out a maximum of 25% from any one pool and from 1st July 2007, commissions applying to wagering events ranging from 14.25% ‘place bet’ to 25% ‘mystery 6’. The retained commission (approx. 16%) is net wagering revenue and is subject to a state government tax of 19.11% and 9.09% federal GST tax. This will reduce post 2012 as part of the revised licensing arrangements to offset the loss to the racing industry of the gaming revenue which will be withdrawn (approximately $80 million).

There are a number of complex formulae in place which constitute the Joint Venture Agreement between the Victorian Racing Industry and Tabcorp, but put succinctly, the VRI receives 25% of Tabcorp Gaming and Wagering Profits after the payment of taxes. This amount is distributed to the three codes according to a formula set out in the agreement. Some of these formulae reflect fixed shares for each code whilst others reflect the codes’ share of the wagering dollar for the year in question, thus the percentage share between the codes varies each year.

Between 2001/02 and 2005/06 TAB turnover on racing in Victoria has increased from $2.81 billion to $3.26 billion.

UNCLAIMED DIVIDENDS All unclaimed dividends with respect to off-course and on-course wagering belong are retained by treasury as consolidated revenue. The government also retains the benefits from fractions when dividends are rounded down. Unclaimed dividends on bookmakers are retained by the bookmakers.

BOOKMAKERS No government tax applied to bookmaker turnover. Victorian Bookmakers pay 1% of turnover to the codes. They pay the clubs 0.9% with the balance (0.1%) credited to the Bookmakers Development Fund held. Between 2001/02 and 2005/06 bookmaker turnover on racing in Victoria has increased from $418 million to $564 million.

CAPITAL SUPPORT The Racing Industry Development Fund has been in operation but ceased on 30 June 2008. However, due to the offset in gaming in 2012, it was announced in October 2008 that a new program for Infrastructure renewal will be established. This fund is to facilitate continuity of racing, principally for sustainability and safety elements such as synthetic tracks, plastic running rails and OH&S issues. The fund has an amount of $86m set aside for the period 08/09 to 11/12 with government contributing $45 million and the racing codes $41 million.

80

TBP.001.031.0081

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

ELECTRONIC GAMING MACHINES Victoria currently has 26,800 machines at 520 venues and the estimated loss by Victorians is just over $2.61 billion a year to gaming machines. . The racing industry in Victoria has ownership of 15 Club venues that have Tabcorp gaming machines (and 1 Tattersall’s site) and they have part ownership of two other Club venues in the Harness code.

Between 2001/02 and 2005/06 turnover on EGM’s in Victoria decreased from $25.4 billion to $24.5 billion.

SPORTS BETTING Conducted by Tabcorp and is currently taxed at 10.91% of net wagering revenue, but under the new license in 2012 it has been reported by the Victorian government to drop to 4.8%.

CASINOS There is one casino in the Victoria, Crown Casino which holds over 2,500 gaming machines.

APPROACHES FOR LEGISLATIVE CHANGE The VRI is currently negotiating with the Victorian government regarding a new funding arrangement after 2012. The state government has stated that they would develop a model which is 'no less favourable' and which provided for a 'viable and growing' industry.

In November 2008, the Victorian Government announced they would reduce pari-mutuel wagering taxes from 19.11 per cent to 7.6 per cent post-2012, which allows the new wagering licence holder to allocate the 11.51 per cent 'saved' to the racing industries. However, Ernst and Young have calculated that the wagering taxes post-2012 must be reduced to between 2.55% and 5.10% per cent to free up enough funding to ensure racing is no worse off.

81

TBP.001.031.0082

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

SOUTH AUSTRALIA

CURRENT WAGERING TAXATION REGIME UNITAB hold the license to conduct off-course totalisator betting in South Australia. UNITAB must return no less than 84% to punters. The remaining 16% is net wagering revenue, which is distributed in the following manner:

Retained by UNITAB 6.56% (41% of net wagering revenue)

Distributed to Racing Industry 6.24% (39% of net wagering revenue)

Federal Tax (GST) 1.45% (9.09% of net wagering revenue)

State Tax 1.75% (10.91% of net wagering revenue)

Total 16% 100%

The 39% allocation to the three codes is distributed through an inter-code agreement. The percentage share between the codes is determined by market share - currently 70% to Thoroughbred, 15% to Harness and 15% to greyhounds.

Between 2001/02 and 2005/06 TAB turnover on racing in South Australia has increased from $622 million to $657 million.

UNCLAIMED DIVIDENDS All unclaimed dividends with respect to off-course and on-course wagering are retained by the government. The government also retains the benefits from fractions when dividends are rounded down. However, fractions and unclaimed dividends will be passed on to the industry under new legislation. Unclaimed dividends on bookmakers are retained by the bookmakers.

BOOKMAKERS There are no State Government taxes on Bookmaker operations. Currently off-course bookmakers are not taxed by the SA government. Between 2001/02 and 2005/06 bookmaker turnover on racing in South Australia has decreased from $139 million to $87 million.

CAPITAL SUPPORT There is no government capital fund for racing; however, the SA government has recently provided one-off payments to the thoroughbred code of $6 million toward Gawler upgrade and $5 million to South Australian Jockey Club (SAJC) for a second track at Morphettville racecourse.

ELECTRONIC GAMING MACHINES The South Australian Racing Industry does not receive any income from gaming machine revenue collected by the SA state government. The major three clubs in each code own gaming venues. The State's pubs and clubs have 12,500 operational EGM’s (reduced from 14,000) and the estimated loss by South Australians is just over $750 million a year to gaming machines.

82

TBP.001.031.0083

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

Between 2001/02 and 2005/06 turnover on EGM’s in South Australia increased from $5.2 billion to $7.3 billion.

CASINOS There is one casino in the South Australia, Sky City Casino which holds over 950 gaming machines.

RECENT LEGISLATIVE CHANGE Tax for on-course investments was abolished from the commencement of the 2005/06 financial year. The SA government announced in January 2008 that taxation on off-course pari-mutuel wagering would be phased out over the four years commencing 2008/09 – 2011/12. This is the first state government to abolish a tax on wagering in Australia. (Refer to Taxation Case Study on page 89).

83

TBP.001.031.0084

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

NORTHERN TERRITORY

CURRENT WAGERING TAXATION REGIME UNITAB hold the license to conduct off-course totalisator betting in Northern Territory. UNITAB must return no less than 84% to punters. The remaining 16% is net wagering revenue and is distributed in the following manner: -

Retained by UNITAB 9.6% (60% of net wagering revenue)

Federal Tax (GST) 1.45% (9.09% of net wagering revenue)

State Tax 4.95% (30.91% of net wagering revenue)

Total 16% 100%

UNITAB also pays 6% of on-course wagering turnover in the Northern Territory directly to the racing industry.

The NT government has a funding model to the racing codes which is unique in Australia. It is a 5 year agreement which includes a payment inclusive for operational and capital requirements. A new agreement is expected to be announced in March 2009.

What this means is the controlling racing code bodies receive a lump sum from the government to which they need to budget their prizemoney, capital, cost of operations etc. The operational grant increases at the same growth of off-course turnover and is capped at 5%pa.

Between 2001/02 and 2005/06 TAB turnover on racing in Northern Territory has increased from $77 million to $107 million.

UNCLAIMED DIVIDENDS All unclaimed dividends with respect to off-course and on-course wagering belong to UNITAB. UNITAB also retains the benefits from fractions when dividends are rounded down. Unclaimed dividends on bookmakers are retained by the bookmakers.

BOOKMAKERS Northern Territory bookmakers under an agreement with the NT Government pay 0.33% of their gross turnover as revenue to the state government. The percentage turnover tax is the same whether the turnover is on-course or off-course. Between 2001/02 and 2007/08 bookmaker turnover on racing in the Northern Territory has increased from $525 million to $3.02 billion.

CAPITAL SUPPORT In 2004/05 the racing industry negotiated a five-year capital agreement with the Northern Territory government. A one-off capital grant of $1,050,000 was provided in year 1, with an additional $350,000 for years 2 – 5. This agreement is currently being renegotiated and will be completed in March 2009.

84

TBP.001.031.0085

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

ELECTRONIC GAMING MACHINES The Northern Territory Racing Industry does not receive any income from gaming machine revenue collected by the NT state government. The state's casinos, pubs and clubs can have up to 1,190 operational EGM’s. Between 2001/02 and 2005/06 turnover on EGM’s in the Northern Territory increased from $335 million to $530 million.

SPORTS BETTING 0% for Australian clients and 0.25% for all others

CASINOS There are two Casinos in the Northern Territory - Lasseters Hotel Casino in Alice Springs (with over 250 gaming machines) and Sky City Casino in Darwin (with over 80 gaming machines).

APPROACHES FOR LEGISLATIVE CHANGE The Northern Territory racing industry is currently negotiating with the state Government in relation to a new funding model. It is estimated that the negotiation on the new funding arrangements will be complete in the coming months.

85

TBP.001.031.0086

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

WESTERN AUSTRALIA

CURRENT WAGERING TAXATION REGIME RWWA holds the license to conduct off-course totalisator betting in Western Australia and is also the three code body for Western Australian racing. RWWA’s net wagering revenue will vary depending on the bet types that make up the pool (i.e. depending on the proportion of bet types). Betting type take out rates range from place bet – 14.5% to favourite numbers - 25%. There is no taxation of on-course wagering in Western Australia. The net wagering revenue is currently 16.92%, which is distributed in the following manner:

Retained by RWWA 13.35% (79% of net wagering revenue)

Federal Tax (GST) 1.54% (9.09% of net wagering revenue)

State Tax 2.01% (11.91% of net wagering revenue)

Total 16.9% 100%

The 79% allocation to RWWA includes distributions to clubs and RWWA operational costs, including the cost of operating the pari-mutuel wagering in Western Australia. The intra-code agreement determines that thoroughbreds receive 59%, harness 28% and greyhounds 13% of the total Distribution. This is currently undergoing review for the 2010/11 racing year. Between 2001/02 and 2005/06 TAB turnover on racing in Western Australia increased from $887 million to $1.26 billion.

UNCLAIMED DIVIDENDS All unclaimed dividends with respect to off-course and on-course wagering are retained by RWWA. RWWA also retains the benefits from fractions when dividends are rounded. Unclaimed dividends on bookmakers are retained by the bookmakers.

BOOKMAKERS Fees collected are passed back to RWWA and there is no tax into government consolidated revenue. Between 2001/02 and 2005/06 bookmaker turnover on racing in Western Australia has decreased from $110 million to $101 million.

CAPITAL SUPPORT In 2006/07 the Western Australian Government provided the racing industry with $20 million over 3 years (which was taken up over a 3 year period) for venue revitalization. This was a one off payment and has not been renewed at this time.

ELECTRONIC GAMING MACHINES The Western Australian racing Industry has a distinct advantage compared to other states in relation to EGMs. The only gaming machines in Western Australia are at the Burswood casino. The total number is capped at 1750 machines. The racing industry in Western Australia does not derive any benefit from the 1750 EGMs.

86

TBP.001.031.0087

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

SPORTS BETTING Fixed odds betting on Sports turnover attracts 0.5% State taxation and pari-mutuel sports turnover – 5% to State treasury.

RECENT LEGISLATIVE CHANGE The Western Australian racing Industry received a reduction from 5% State Tax on total turnover - which also carried a 0.5% rebate (approximately 28% of net wagering revenue), down to 11.91% State Tax on net wagering revenue.

87

TBP.001.031.0088

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

TASMANIA

CURRENT WAGERING TAXATION REGIME Similar to the Northern Territory, Tasmania has a funding model where the State government collects fees and then funds the racing codes at an agreed total amount (around $30m annually). Recent changes to the racing industry in Tasmania have seen the removal of the three codes of racing in favour of a three code body (Tasmanian Racing Board).

Net wagering revenue will vary depending on the bet types that make up the pool; however, it is approximately 16%. Between 2001/02 and 2005/06 TAB turnover on racing in Tasmania has increased from $229 million to $302 million.

BOOKMAKERS Bookmakers are currently charged 1% of turnover. Between 2001/02 and 2005/06 bookmaker turnover on racing in Tasmania decreased from $6.6 million to $5.1 million.

BETTING EXCHANGES In November 2005, the Tasmanian Parliament approved amendments to the Gaming Control Act 1993 to allow the licensing and regulation of betting exchanges in Tasmania. The first betting exchange licence granted by the Tasmanian Gaming Commission was to Betfair Australia in January 2006. Betfair currently pays the Tasmanian government 15% tax for every dollar that it makes on Australian horse racing and sporting events and a 20% levy on every dollar that it make on Australian horse racing

CAPITAL SUPPORT The capital funding of the Tasmanian racing industry forms part of the overall government funding model. Recent capital improvements include $16 million development of the Elwick racecourse for a tri-code centre and $6 million for lights at Tasman Park in Launceston.

ELECTRONIC GAMING MACHINES The Tasmanian racing industry does not receive any income from gaming machine revenue collected by the Tasmanian state government. The state's casinos, pubs and clubs can have close to 3,700 operational EGM’s (which is capped). Between 2001/02 and 2005/06 turnover on EGM’s in Tasmania increased from $853 million to $953 million.

CASINOS There are two Casinos in the Tasmania – Wrest Point Casino in Hobart (with over 660 gaming machines) and Country Club in Launceston (with over 512 gaming machines.)

88

TBP.001.031.0089

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

APPROACHES FOR LEGISLATIVE CHANGE There model is currently being reviewed via Gaming Control Act and an announcement will be made in the next six months. The model will provide the industry with direct revenue from betting which will be subject to government tax, although those tax rates are yet to be announced. The Tasmanian government has guaranteed that the Tasmanian Racing Industry will not be worse off by these arrangements.

89

TBP.001.031.0090

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

TAXATION CASE STUDY – SOUTH AUSTRALIAN RACING INDUSTRY

BACKGROUND The South Australian Racing Industry began to stagnate in the late 1980’s and this was further exacerbated in the mid 1990’s following the introduction of gaming machines to the state. The SA racing industry was denied any share of gaming revenue or taxation relief to offset the migration of betting on racing to gaming machines following their introduction. These events also coincided with changes in favour of the Victorian Racing Industry whereby the Victorian state government provided the racing codes in that state with a 25% shareholding of net profits from gaming activities. This provided racing in Victoria with significant revenue and as a result investment in SA racing declined and the number of race meetings and races conducted steadily reduced as participants such as trainers, jockeys and racehorse owners sought to compete in the more lucrative Victorian market.

In 1993, the year prior to introduction of gaming machines, total wagering on racing codes products exceeded $735m (TAB, on course totalisator and bookmakers). More than a decade later the total is just over $782m, so in real terms turnover has declined. A significant drop in bookmaker and on course tote betting has been recorded and TAB growth has been moderate and spasmodic.

Gaming machine turnover since their introduction in 1994 has been strong and in 2005/06 turnover exceeded $7.3 billion. Player losses more than $750m and SA government taxation collected now almost $300m annually.

SALE OF THE SA TAB – CHANGES TO FUNDING FORMULA The sale of the SA TAB by the then state government in year 2000 was motivated partially to assist the racing codes to maintain a competitive base against increased revenues and funding enjoyed by other racing jurisdictions.

The sale model included provision for a new formula whereby the racing codes would receive a share of net wagering revenue rather than the previous share of retained TAB profits. This new model was far more attractive to the codes and by any calculation has indeed provided the SA racing industry greater annual returns than would have been receipted under the former profit model.

SALE OF SA TAB – PROVISION OF CAPITAL SPENDING Additionally, the racing codes received a cash injection of funds for badly needed capital improvement programs to rejuvenate ageing infrastructure. However, from this provision, funds were effectively a prepayment and required repayment to the government of the day of an amount of $34m to be paid in annual installments over a 12 year period from 2004/05 to 2015/16. This arrangement is commonly referred to as ‘clawback’.

90

TBP.001.031.0091

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

TAB GROWTH PATTERNS AND IMPEDIMENTS The model for repayment by the racing codes to the government of up-front capital was premised on wagering growth calculations post sale in the range of 3-4% annually. These forecasts were not achieved in the three immediate years after the sale (there are many varied beliefs of the reasons why) and this lack of growth was magnified from the introduction of the first ‘clawback’ year in 2004/05.

The years subsequent to 2004/05 have seen quite reasonable TAB growth recorded. However, gains have been followed by periods of decline in wagering directly related to two phenomena - the SKY/TVN broadcasting split vision dispute in 2005/06 and the unprecedented equine influenza crisis in 2007/08.

THE MAJOR GOVERNMENT REFORM 2008 All of the above circumstances conspired to leave the SA racing industry with low levels of prizemoney in comparison to other mainland states of Australia, meagre reserves for capital improvements and declining investment in the local industry.

The state government in year 2008 in response to these events has proposed a new unprecedented support and rejuvenation plan. The cornerstone of which is the complete removal of taxation by government on any form of wagering (note – taxation on bookmakers holdings and on-course totalisator betting had previously been abolished).

The process of the totalisator tax withdrawal is to be incremented over a four year period from 2008/09 through 2011/12, so that by the commencement of the 2012/13 fiscal year the SA racing codes (on current projections) will be in receipt of approximately $8.5m of additional revenue.

Racing Minister Michael Wright says he is looking forward to seeing the racing industry move forward.

“SA is the first state in Australia to abolish taxation revenue from racing wagering activity on bookmakers, on-course totalisator, and now TAB operations,” he said.

“As a result of these tax reform measures, the racing industry will be in a position to boost prize money on offer for racing participants in South Australia and I expect the flow on effects to be substantial.

“There is no doubt that more prize money leads to a better class of horse and greyhound racing. This in turn creates increased investment activity, which generates a larger amount of funds for the racing industry.

“This is also great news for country racing clubs and regional communities. Not only will extra prize money deliver better racing in these areas, it will increase race related tourism and bring dollars to local economies.

91

TBP.001.031.0092

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

“The Rann Government wants a healthy and self sufficient racing industry in South Australia. If the codes continue to work in the right direction, I am confident the benefits will flow in the future,”

FURTHER MEASURES The South Australian racing industry has been striving to achieve a model of sustainability and has in recent times announced bold plans to achieve this objective. These include the judicial sale of assets and streamlining its core racing activities to a smaller number of key racing venues. This is evidenced by the closure of Victoria park racecourse in 2008 and the recent closure of Cheltenham Park racecourse with its last race meeting being in February 2009.

• Adelaide metropolitan racing will now be conducted at just one venue – Allan Scott Park Morphettville (ASPM) with two turf racing tracks. The state government provided a one-off grant of $5m toward the construction of the second inner turf track.

• A proposed $12m upgrade to the racecourse situated at rapidly growing region of Gawler is being funded by a combination of government ($6m) and club/industry body funds (club funding facilitated through sale of excess freehold land on racecourse title).

Racing Minister Wright said “The taxation reform measures combined with major upgrades in racing infrastructure are part of the state government’s commitment to providing a healthy and self sufficient racing industry in South Australia”.

SUMMARY

Year Action 1994 Gaming machines introduced into South Australia 2000 SA TAB privatised, racing codes receive up-front payment for immediate capital improvement projects 2004/05 Clawback tax commences – $34m in total to be repaid by racing codes over twelve year period concluding 2016 2006 SA Government abolishes taxation on on-course wagering 2008 SA Government announces removal of off course totalisator wagering taxation – to be phased out over four year period to 2012 2008 SA Government provides $5m grant toward second turf track at ASPM 2008 SA Government provides $6m grant toward Gawler racecourse redevelopment 2009 SA Government issues Ministerial DPA for proposed Greenfields racing and training environment at Murray Bridge

Source: IER

92

TBP.001.031.0093

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

ECONOMIC METHODOLOGY

OVERVIEW OF THE EXISTING MODEL MMR is a very detailed dynamic, multi-sectoral, multi-regional model of Australia. The version of the model used in this study distinguishes 55 industries, 57 products, 8 states/territories and 56 sub- state regions.

There are five types of agents in the model: industries, capital creators, households, governments, and foreigners. For each industry in each region there is an associated capital creator. The sectors each produce a single commodity and the capital creators each produce units of capital that are specific to the associated sector. Each region in MMR has a single household and a regional government. There is also a federal government. Finally, there are foreigners, whose behaviour is summarised by export demand curves for the products of each region and by supply curves for international imports to each region.

MMR determines regional supplies and demands of commodities through optimising behaviour of agents in competitive markets. Optimising behaviour also determines industry demands for labour and capital. Labour supply at the national level is determined by demographic factors, while national capital supply responds to rates of return. Labour and capital can cross regional borders so that each region's stock of productive resources reflects regional employment opportunities and relative rates of return.

The specifications of supply and demand behaviour co-ordinated through market clearing equations comprise the general equilibrium (GE) core of the model. In addition to the core there are five blocks of equations, covering:

1. Regional and federal government finances; 2. The operation of regional labour markets; 3. Inter-temporal links between investment and capital; 4. Greenhouse and energy accounting; and 5. The disaggregation of state results down to results for sub-state regions.

Of these additional blocks of equations, the sub-state regional disaggregation facility plays the most important role in the modelling reported in this paper. The facility is explained below.

DISAGGREGATION TO SUB-STATE REGIONS Few multi-regional models of the Australian economy have the level of sectoral detail supported by MMR. This detail is usually more than adequate for contributions to public discussions on the effects of changes in policies concerning taxes, trade and the environment. However, people wanting to use MMR in business and public sector planning are often frustrated by the lack of relevant regional detail. This applies especially to people interested in regional adjustment issues.

93

TBP.001.031.0094

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

These regions are based on the Statistical divisions defined in the Australian Standard Geographical Classification (ABS catalogue number 1216.0). Our division structure differs slightly from that of the ABS. We combine the ABS’s Darwin and Northern Territory - balance divisions into one division, Northern Territory. Similarly, Canberra and ACT - balance are combined into one division, Australian Capital Territory. Note that both territories are distinguished as separate regions in MMR. Hence, the tops-down disaggregation facility provides no additional detail for them.

The methodology for tops-down regional disaggregation involves firstly classifying each of MMR's industries into one of two categories: state and local. State industries produce commodities that are readily traded across sub-state regional boundaries. Examples are most agricultural and mining industries. The regional outputs of industries producing state commodities are assumed to move in line with the state-wide percentage rates of change calculated by MMR.

Local industries produce commodities for which demand within each sub-state region is satisfied mainly from production in that region. Examples include perishable items and services like wholesale and retail trade. The outputs in each region of industries producing local commodities are modelled as depending mainly on demand within the region. In calculating the local demand for the output of local industry j, MMR takes account of:

1. intermediate and investment demands both by local industries and by state industries located in the sub-state region;

2. the region's household demands, which are a function of population and employment changes and of the change in consumption at the state level;

3. government demand; and 4. (if industry j’s output is a margin commodity like transport) the usage of industry j’s product in facilitating the flow of local and state commodities within the sub-state region and international export flows out of the region. This gives our regional calculations a multiplier property: the effect on a sub-state region’s overall level of activity of a favourable mix of state industries is multiplied through induced effects on the output and employment of the region’s local industries.

In the regional disaggregation, the possibility of some demand for local commodities outside the region of their production is allowed, but not from outside the state in which the region is located. This is because our data imply that for almost all commodities there is at least some imbalance at the sub-state regional level between demand and supply.

ENHANCEMENTS FOR QUEENSLAND PROJECT In the standard version of MMR as described above, activities associated with racing (breeding, training, race club operation and wagering) are included in two larger composite industries. Specifically, the activity of breeding is part of industry 1 Agriculture – animals and the activities of training, race club operation and wagering are included in a residual services industry. Having breeding and stud operation in a separate agricultural composite industry does not pose special difficulties for this study. However, having the remaining racing activities lumped together with non-

94

TBP.001.031.0095

Size and Scope of the Racing Industry in Queensland IER Pty. Ltd.

racing services does pose difficulties with respect to reporting and to simulation design. To avoid problems, the residual services category was split into the following four new industries.

Thoroughbred racing - which consists of enterprises engaged in operating facilities specially used and designed for the thoroughbred racing industry (including horse training, race club operation and those parts of totalisator agency operation and bookmaker operations dealing with thoroughbred racing; Harness racing – analogous to the thoroughbred racing industry but relating to harness racing; Greyhound racing – analogous to the thoroughbred racing industry but relating to greyhound racing; and Services – comprising the remainder of the previous miscellaneous services composite (primarily non-racing cultural and recreational services). The input structures of the three new racing industries have been assembled using data provided by IER. Key inputs to each industry are:

• Agriculture – animals (the horses and dogs used in racing);

• Labour (wages, salaries and supplements paid to jockeys, training staff, race club staff, etc.);

• Materials and services associated with running training operations, race clubs and betting facilities; and

• Capital (for which profit is the return).

Note that prize money, which is allocated from wagering revenue received by the totalisator agency, is part of the profit of each racing industry.

The new industries sell racing services only to households. The basic value of racing services output equals, broadly, the sum of training fees, the value of race club admittances and membership and the gross value of wagering. The value purchased by households equals the basic value of racing output plus the value of government gambling taxes.

It is assumed that the household elasticity of demand for racing services in each state is very high, reflecting the ease with which consumers from one state can shift their betting expenditure to another state in response to changes in relative prices. This means, for example, that an increase in price of racing services in Queensland relative to the price of racing services in Victoria/NSW will induce a large shift in demand away from Queensland racing towards Victoria/NSW racing.

95

TBP.001.031.0096

Racing Queensland

Tracking Towards Sustainability TBP.001.031.0097

This page intentionally left blank TBP.001.031.0098

16 November 2015

The Hon Bill Byrne MP Minister for Agriculture and Fisheries Minister for Sport and Racing Member for Rockhampton GPO Box 46 BRISBANE QLD 4001

Dear Minister

Please find enclosed the Racing Queensland “Tracking Towards Sustainability” report for your Wagering revenue is the lifeblood of the industry and our ability to meet commitments, at their present consideration. This report has been prepared in accordance with the Treasurer’s direction dated 27th levels, is almost entirely dependent upon our ability to increase wagering revenue. With this in mind, August, 2015 requiring Racing Queensland to prepare a plan that enables it to return to profitability we have endeavoured to link performance in relation to wagering income to a number of key from 1 July, 2016. It will be recalled that past operating losses had exhausted Racing Queensland’s performance indicators so as to focus all participants on steps they can take to enhance wagering cash reserves and that a loss of approximately $28,000,000 was anticipated for the 2016 financial revenue. year. Our plan also allows for increased returns to participants, reflecting changes in wagering revenue, to In preparing the report, we have considered many representations and ideas provided to Racing be distributed in a timely way. Queensland through both a targeted participant group and a public consultation process. We are encouraged by the prospect that our premier course, Eagle Farm, will be fully operational by Our biggest challenge has been to manage our costs and distributions to industry within the mid-2016 and by the additional revenue to be generated by the changes to the Race Information limitations of our revenue. We have endeavoured to balance the needs of the various participant Fees. groups and to ensure that, through the consultation process, there are no unforeseen adverse consequences for any participant group. Yours sincerely A further safeguard will be provided by the publication of the report, once it is made public, on the Racing Queensland website enabling further public and industry consultation and comment.

The focus of the report, given its timeframe, is necessarily on short term initiatives and the distribution of wagering income. Longer term proposals to improve profitability and develop existing and future sources of revenue have not been ignored; some are referred to in the report. They and others, including potential Government support, particularly for country racing, will be considered as part of a The Honourable John Muir QC longer term strategic plan integrating the infrastructure strategy which will be developed early in the Chairman, Queensland All Codes Racing Industry Board New Year.

The report aims to reset the goal posts and provide a platform by which additional revenue streams can be explored and developed to enhance the industry’s self sustainability.

TBP.001.031.0099

Contents

Page

Definitions 4

1. Executive summary 5

2. Background 26

3. What is the Impetus for Change 29

4. The Structure of the Racing Industry in Queensland 36

5. Consultation Process and Outcomes 43

6. Sustainability Plan 49

7. Infrastructure 86

8. Animal Welfare 89

Appendix 1 – Cross Subsidisation by Code 92

3 Tracking Towards Sustainability TBP.001.031.0100

Glossary of terms

BAU Business as usual QACRIB Queensland All Codes Racing Industry Board

CEO Chief Executive Officer QBred A breeding scheme for standardbred horses

COI Commission of Inquiry QGreys A greyhound racing breeding scheme

DET Department of Education and Training QLD Queensland

FY11 The year ending 30 June 2011 QJA Queensland Jockeys Association

FY12 The year ending 30 June 2012 QPS Queensland Police Service

FY13 The year ending 30 June 2013 QRIC Queensland Racing Integrity Commission

FY14 The year ending 30 June 2014 QTIS Queensland Thoroughbred Incentive Scheme

FY15 The year ending 30 June 2015 RIF Race Information Fee

FY16 The year ending 30 June 2016 RISA Racing Information Services Australia

FY17 The year ending 30 June 2017 RSPCA Royal Society for the Prevention of Cruelty to Animals

Government Queensland Government RTO Registered Training Organisation

IP Intellectual property RQ Racing Queensland

k Thousand SKY Sky Racing

KPI Key performance indicator TAB meeting A race meeting where off-course wagering is available

m Million TEQ Tourism and Events Queensland

The consolidated group Includes RQ and its controlled entities, including MacSporran Report The report produced by Commissioner Alan MacSporran QC Queensland Race Product Co Limited, Sunshine Coast from the COI into QLD greyhound racing Racing Unit Trust and Rockhampton Racing Pty Ltd.

Non-TAB meeting A race meeting where off-course wagering is not available Treasury Queensland Treasury

p.a. Per annum VIC Victoria

PRA Principal Racing Authority WSP Wagering service provider

4 Tracking Towards Sustainability TBP.001.031.0101

1. Executive Summary TBP.001.031.0102

Executive Summary Snapshot

The QLD racing industry is of high importance. It employs a Key figures substantial number of people. Country racing provides social and ($11.2m) ($12.7m) $14.5m $129.8m RQ’s FY15 loss The consolidated group’s FY15 Country racing funding Total prizemoney & breeding economic benefit to local loss above RQ’s minimum obligation initiatives paid in FY15 communities, and there is significant history and tradition associated with the industry. ($28.0m) ($14.1m) ($10.2m) ($3.7m) RQ’s forecast FY16 loss Forecast FY16 deficit for Forecast FY16 deficit for Forecast FY16 deficit for The racing industry is facing the thoroughbred code the harness code the greyhound code challenges relating to: animal welfare; shifts in the The importance of the QLD racing industry Where are we now wagering market; the • The QLD racing industry employs a substantial number of people. • Animal welfare is a key issue for the racing industry. Some sources quote a figure of 30,000 across the state. Many of demands of country racing; • RQ derives the bulk of its revenue from wagering activities. these are in regional and remote communities. the extent of jockeys’ • The wagering market has shifted from pari-mutuel wagering to fixed • Country racing is a major community activity which provides odds, which produces a lower return to RQ. benefits; prizemoney considerable social and economic benefit to local communities. demands and ageing • Corporate bookmakers have increased turnover while UBET’s • Participants are passionate about racing and many are emotionally (RQ’s major wagering partner) turnover has declined. infrastructure. and financially attached to the industry. • Sports wagering is a growing activity which competes with racing On a BAU basis, RQ has • There is significant history and tradition associated with QLD wagering. racing. forecast a loss of $28.0m for • While country racing provides a social and economic benefit to rural • The industry structure is complex. Participants are interdependent FY16, which is not communities, it comes at a significant cost to the racing industry. and all play a part in the industry’s sustainability. One part cannot sustainable. A realignment of adjust without the others. • Jockeys undertake the most dangerous role in the industry. industry expenditure against • The industry provides taxation revenue to the Government. • Clubs are facing challenges arising from ageing infrastructure and revenue is required to create the need for constant maintenance to ensure facilities meet • The industry brings in tourism revenue: for example, from Magic a sustainable industry and a required standards. Millions day and from key race meetings such as the Birdsville base for future growth and races and the Cairns Amateurs. • Significant investment is required to enable the industry to develop alternative sources of revenue. development.

6 Tracking Towards Sustainability TBP.001.031.0103

Executive Summary Background

This report considers the • On 9 April 2015, a Commission of Inquiry into the QLD greyhound • The new UBET agreement also proposed a joint venture with RQ to racing industry was constituted. On 1 June 2015, Commissioner develop a virtual racing product, which was estimated to generate feedback received from the Alan MacSporran QC handed down his report identifying an additional $15.0m revenue per annum. However, RQ consultation process, deficiencies in RQ’s regulatory framework. understands that due to exclusivity arrangements between the State Government and a different gambling operator, the virtual evaluates the financial • The MacSporran report also made recommendations, including: racing product will not be implemented in the short term. impact of the options on the Establishing an authority to ensure the integrity of racing with o • RQ’s expenditure is forecast to exceed revenue by $28.0m in FY16. governing principles, the appointment of a full time independent commissioner; Without cash reserves, this is unsustainable. determines a plan to address The abolition of the three existing codes’ Boards; and o • A series of consultation meetings with industry stakeholders was the $28m budget shortfall o The establishment of a seven member all codes Board held with the purpose of seeking input on ways to improve public and discusses longer term containing four members independent of the racing industry. confidence and integrity in the racing industry and to ensure the long-term sustainability of QLD’s racing industry. revenue opportunities to • On 4 June 2015, in response to the recommendations in the grow industry revenue. MacSporran Report, the Government removed the three code • As part of the consultation process, a discussion paper was boards, stood down RQ’s CEO and appointed the Honourable John released and an option for the public to make online submissions Muir QC as Interim Chairman of QACRIB. He appointed Mr Ian Hall was made available. as Acting CEO of RQ. • Participants were asked to identify areas where savings could be • Shortly following his appointment, Mr Hall was presented with a made in order for RQ to establish a break-even budget from 1 July draft financial budget that indicated a loss of $21.0m in FY16. 2016. Despite identifying $6.0m in savings, a review of revenue • Key themes identified throughout the consultation process are assumptions revised the FY16 forecast to a $28.0m loss. summarised on pages 45 to 48. • RQ negotiated a new 30 year wagering agreement with UBET, • RQ has undertaken a thorough review and assessed the feedback which commenced on 1 July 2014. It provided additional fixed fee received through the consultation process in order to determine: revenue of $15.0m p.a. and approximately $97.4m as funding for industry infrastructure. However, a number of factors have o Opportunities available to RQ to increase revenue; and adversely affected RQ’s revenue, including a stabilisation of Potential avenues to reduce expenditure in line with the wagering turnover, the shift from pari-mutuel wagering to fixed odds o governing principles identified on page 9 hereof. and the growth of corporate WSPs. • This report considers the feedback received from the consultations • Additionally, RQ’s wagering revenue has been reduced by the process, evaluates the financial impact of the options on the refurbishment of the Townsville and Eagle Farm tracks. governing principles, determines a plan to address the $28.0m budget shortfall and discusses longer term revenue opportunities to increase industry revenue.

7 Tracking Towards Sustainability TBP.001.031.0104

Executive Summary Approach

Approach – Share in the ups and downs Approach – Governing principles • The racing industry is sustained by wagering revenue. In simple To guide RQ in assessing the opportunities and options raised during terms, as wagering revenue has not met expectations in prior the consultations and in its decision making, a set of governing years, expenses and payments have not been reduced to reflect principles has been identified. They are listed on the following page. the reduction in wagering revenue, thus creating operating losses. Approach – Financial modelling • In order to reflect this variability, and to encourage the focus of all • As the racing calendar for FY17 will not be finalised until March industry participants on increasing wagering revenue, this plan 2016, it is impractical to prepare a detailed budget for FY17. proposes that participants will receive both a fixed base amount and a variable portion where either: • Accordingly, in preparing the financial modelling for the sustainability plan, RQ has utilised the budget for FY16 as a base, • KPI’s can be linked directly to wagering revenue on the basis of and has applied the following adjustments: such wagering revenue, or • Revenue assumptions have been adjusted to reflect Eagle Farm • Where they are indirect, the variable portion will be linked to the running at the normal schedule, and with the proposed race overall performance of RQ. information fee structure set to commence from 1 November • The variable portion will be reviewed on a quarterly basis, with 2015, and returns to participants adjusted accordingly. • Expenditure assumptions remain generally consistent. However Approach – Whole of industry approach an increased allowance has been made for animal welfare initiatives and the stewarding and integrity department which is • The sustainability plan endeavours to make each of the three racing to be transferred to QRIC. codes financially independent. • RQ anticipates the budget for FY17 will be set in March 2016. • On this basis, the budget loss for harness for FY16 is significantly Participants will then be advised if there are any material changes greater than the other codes when compared to its revenue base. to the measures outlined in this report. • Other states of Australia have acknowledged the disparity between Approach – Timeframe the codes in general through a legislated intercode split of wagering revenue. • The objective of this plan for the racing industry is to operate at a surplus from 1 July 2016 onwards, and accordingly the primary • RQ has obligations under section 9AF of the “Racing Act” to act in a initiatives are short-term. RQ acknowledges that there will be other way that is in the best interests of the thoroughbred, harness and initiatives and plans which have a longer term impact on the greyhound codes of racing as a whole, while having regard to the sustainability of the industry. interests of each individual code. The sustainability plan has endeavoured to make the three codes operate under their own • The Government has provided a loan to RQ to enable it to meet the revenue base. However, in consideration of RQ’s obligations under anticipated losses for FY16. the Racing Act, allowances have been made for a level of cross- • In order to minimise the level of funding required, where subsidisation between the codes. practicable, RQ intends to implement a number of the financial measures commencing from 1 January 2016, with the majority of the remaining measures commencing from 1 July 2016.

8 Tracking Towards Sustainability TBP.001.031.0105

Sustainability Plan Governing Principles

Set out to the right are the Principle Description governing principles on which the options for the All participants share in the upside and risks and therefore are linked to the success Share the upside and risks sustainability plan have 1 of the industry. been assessed. All participants should be aware that the industry is funded by wagering revenue and Industry linked to wagering 2 can influence this by either enhancing integrity or influencing wagering behaviours. The plan should reflect what is fair and reasonable to each participant, between Fair and reasonable 3 participants and to the industry as a whole. The plan should deliver a whole of industry approach (i.e. not limited to individual Whole of industry approach 4 stakeholders). The industry should be encouraged to work as one, rather than individual parts – Everyone is interconnected 5 everyone has a role to play. The plan should provide for a form of sinking fund to provide for regeneration and to Sinking fund for growth 6 support new growth initiatives. Community experience and The plan should encourage a community experience and a social license including 7 social license animal welfare. Open, transparent and The plan should be open, transparent, consistent, and easily understood by 8 consistent participants. Reinvest in target growth The plan should reinvest in targeted areas to promote industry participation. 9 areas Accountability for the use of Accountability for the use of industry funds is likely to reduce expenditure and 10 industry funds increase funds available for stakeholders. 11 User pays system Enables participants to appreciate the true cost of services provided.

9 Tracking Towards Sustainability TBP.001.031.0106

Executive Summary Summary of Financial Impacts – FY17

Set out to the right is a Amount Amount Item Page Item Page summary of the financial (‘000) (‘000) impacts of the measures RQ BAU budgeted loss (28,000) Expenditure options for FY17 is proposing to return the Prizemoney Adjustments Revenue Opportunities and Adjustments for FY17 racing industry to a break Thoroughbred 77, 80 8,540 even position from 1 July Eagle Farm included within the schedule and 54, 55 3,832 Harness 78, 80 2,939 2016 onwards. proposed Race Information Fee structure Greyhounds 79, 80 2,644 Return from Assets As the racing calendar for Country Racing Adjustments (net of 81 4,221 FY17 will not be finalised Rental income from Albion Park 57 150 regeneration/investment fund) until March 2016, it is Club Administration Subsidies (net of Increase in Car Parking Revenue 61 70 65-69 1,500 impractical to prepare a specific purpose funds) detailed budget for FY17. Non-starters’ scratching fees 61 400 Greyhound trainer appearance fees 85 250 Breeding schemes As such, RQ has utilised the Potential Government funding for 1 day/year races 58 830 BAU budget as a base, and QTIS 74 1,560 has applied the adjustments Budgeted loss after Revenue Adjustments (22,718) QBred 74 990 set out in the tables to the Cost savings right. Albion Park Facility 84 160

CCU footage passed on to clubs 85 300 Marquees 84 98

Super screens 84 49

Awards nights 84 178

On-course fielding incentive 85 783

Potential surplus for loan repayment 1,494 and regeneration fund

10 Tracking Towards Sustainability TBP.001.031.0107

Sustainability Plan Timeframe, Action Plan and Milestones

The timeline to the right sets 100% out the stages and key dates in the implementation of the sustainability plan. Consultation, ‘Soft’ implementation Full implementation preparation and approval There will be staged implementation of measures % of implementation introduced from 1 January 0% 2016, with full implementation from 1 July 1 July 2015 1 January 2016 1 July 2016 1 January 2017

2016. Key dates: Key dates: Key dates: • Extensive consultation carried out with • Staged implementation of sustainability • All measures fully implemented from 1 a wide cross-section of industry plan measures introduced. July 2016. stakeholders. • RQ to publish racing schedule for • Break even financial performance from • Consideration of feedback received FY17 by 31 January 2016. 1 July 2016. throughout the consultation process. • Clubs submit FY17 budget to RQ by • Review to be conducted in January • Preparation of this document. 28 February 2016. 2017 to assess the outcomes of the sustainability plan. • RQ FY17 budget prepared by 31 March 2016. • QJA to indicate pool distribution preferences to RQ by 30 April 2016.

11 Tracking Towards Sustainability TBP.001.031.0108

Executive Summary Timeframe

Set out to the right is the Timing of Implementation 16 17 15 16 16 15 16 16 16 17 16 16 17 17 16 17 16 17 16 16 ------proposed implementation - - - - FY17 ------Revenue Jul Apr Oct Apr Jan Jan Feb Mar Jun Feb Mar Jun Dec timeframe of the Dec Sep Nov Nov May Aug Revenue Opportunity Description Impact Commencement May sustainability plan Eagle Farm Full Schedule May-16 measures. $3.8m New Race Information Fee Structure Nov-15

Rental Return from Assets $150k Jul-16

Car Parking Revenue $70k Dec-15

Scratching Fees - Thoroughbred $400k Immediate

Government - 1 day a year races funding $830k 2016 calendar

Adjustments to Licensing Structure T.B.C. Jul-16

Audit of Bookmakers T.B.C. Immediate

Optimisation of Racing Schedule T.B.C. Apr-16

Registered Training Organisation T.B.C. Jul-16

Key: Confirmed: To be Confirmed:

12 Tracking Towards Sustainability TBP.001.031.0109

Executive Summary Summary of Options - Revenue

Option Description Implementation FY17 Financial Impact Timeframe Eagle Farm included within the schedule and • Eagle Farm was closed for renovations through FY15 and is RQ will not see the full A $3.8m increase in Proposed Race Information Fee structure scheduled to return in May 2016. effect of Eagle Farm revenue. • It is expected that in FY17 it will hold its usual number of race reopening until FY17. meetings. • The proposed new RIF structure will commence from 1 The amended RIF structure November 2015. will be implemented from 1 • RQ has introduced an incentive to entice WSPs to increase November 2015. turnover.

Scratching Fees - Thoroughbred • In FY15 there were 21,881 $40 non-starters fees imposed. Immediately. An increase in revenue of • This category of scratching fee has not been increased since $400k has been included 2003. in the FY17 adjustments. • It is proposed to increase the fee to $65, which RQ considers is still a modest amount. • It is expected that this change will result in an increase in revenue to RQ of approximately $400k to $450k.

Return from Assets • RQ is currently undertaking a review of all its assets to Rental will be charged to $150,000 from rental. understand the opportunities to generate rental income. Brisbane Greyhound Club • Both the Brisbane Greyhound Club and the Albion Park Harness and Albion Park Harness Club do not pay rent to occupy the Albion Park facility. RQ Club from 1 June 2016. intends to introduce rent from 1 July 2016. $70,000 from additional • RQ notes that the wider racing community generally bears their Additional car parking car parking. own costs in relation to the premises they occupy. revenue is anticipated to be • The asset review will also seek to ensure that outgoings are generated prior to FY17. passed on to tenants where appropriate. • An additional 60 car spaces have been identified at Albion Park, which will be open to the public from 1 January 2016. It is expected that these additional spaces will generate approximately $70k per annum.

13 Tracking Towards Sustainability TBP.001.031.0110

Executive Summary Summary of Options - Revenue

Option Description Implementation FY17 Financial Impact Timeframe

Potential Funding for 1 day/year races • RQ will continue to work with Government to identify Immediately. Prizemoney for one day a opportunities for support. year races totals $1.65m in 2016. RQ has included six months of this amount in its adjustments for FY17, totalling $830k representing the period from 1 July 2016 to 31 December 2016.

Alignment of racing calendar with major events in • As noted in the optimisation of the racing schedule section, RQ is Continuing. No provision included country areas currently reviewing the scheduling of major events in country within RQ’s FY17 regions in order to determine opportunities to align the racing adjustments. However it is calendar with periods that may provide higher race day anticipated that the attendances. initiative to align major • It is proposed that RQ prepare a factsheet for country clubs events with racing is likely setting out avenues to increase racing and non-racing revenues. to increase race day • RQ will also create a ‘club liaison officer’ position to assist clubs revenues for Non-TAB to increase revenue streams. clubs.

Adjustments to licensing structure for all three • RQ is responsible under the Racing Act for licensing participants Updated fee structure To be confirmed. codes, particularly greyhounds in the racing industry. implemented for FY17. • License fees are set per code and updated each financial year. • Historically, license fees have been maintained at a low level in order to reduce barriers to entry and encourage industry participation. • RQ proposes to conduct a review of the licensing structure.

14 Tracking Towards Sustainability TBP.001.031.0111

Executive Summary Summary of Options - Revenue

Option Description Implementation FY17 Financial Impact Timeframe Audit of Bookmakers • RQ currently charges different categories of bookmakers RQ has requested To be confirmed. different fees depending on the type of product being offered. proposals to conduct • Concerns have been raised as to whether bookmakers are audits. remitting the appropriate returns to RQ. Audits will be conducted • RQ has requested proposals for an external party to conduct prior to 30 June 2016. audits of wagering partners to ensure they are providing RQ with the correct return.

Optimisation of the RQ racing schedule from a • Review the racing schedule to ensure maximised coverage of Minor changes to be To be determined following wagering viewpoint RQ’s racing product. implemented from 1 finalisation of the • Consider opportunities such as night racing, holding a regular January 2016, with the optimised schedule. north QLD race circuit between 3 – 4 tracks, turning some non- optimised schedule fully TAB tracks into TAB tracks and rescheduling Saturday race implemented from 1 July meetings to weekdays or Sundays. 2016. Registered Training Organisation • As a Registered Training Organisation, RQ offers nationally Within FY17. Revenue To be confirmed. recognised training with funding assistance from DET. generated from offering • A number of the courses offered by RQ are conducted at a RTO programs interstate significant cost to the industry, the greatest of which is the jockey may be beyond this date. apprenticeship program which costs RQ approximately $40,000 per apprenticeship. • RQ is currently exploring avenues to increase revenue through the Registered Training Organisation by offering existing courses to interstate students.

15 Tracking Towards Sustainability TBP.001.031.0112

Executive Summary Summary of Options - Revenue

Option Description Implementation FY17 Financial Impact Timeframe

UBET • Over the past five years, wagering turnover with the Corporate Continuing. No specific provision WSPs has increased by greater than 100%, while turnover with included within FY17 UBET has contracted by nearly 10%. This has had a detrimental RQ is holding regular adjustments. impact on wagering returns to RQ. meetings with UBET to • Pari-mutuel wagering provides a higher return to RQ at lower risk discuss the various than fixed odds wagering. However, the trend in the wagering opportunities. market is to choose fixed odds. • RQ will work with UBET to consider strategies to prevent the decline of pari-mutuel wagering. This is particularly important as there is a 30-year agreement in place between RQ and UBET. • The introduction of UBET’s electronic betting terminals could potentially increase wagering returns to RQ by approximately $2m p.a. • UBET should take into account the following characteristics of pari-mutuel wagering in its marketing: • It provides the biggest return to the QLD racing industry, at the lowest risk; • It provides an opportunity to create UBET loyalty; • It offers a different experience, in that it makes wagering a social rather than gambling experience; and • It affords the best opportunity for mate-get-mate marketing.

16 Tracking Towards Sustainability TBP.001.031.0113

Executive Summary Timeframe

Timing of Implementation 16 16 17 15 16 16 15 16 16 16 16 17 17 17 16 17 16 16 17 16 - FY17 ------Expense - Jul Oct Apr Apr Jan Jan Feb Jun Feb Jun Mar Mar Dec Sep Dec Nov Aug Nov May Set out to the right is the Expenditure Option Description Impact Commencement May proposed implementation New Club Funding Model $1.5m Jul-16 timeframe of the sustainability plan Jockeys’ Pool of Funds Nil Jul-16 measures. Breeding Schemes $2.6m Jul-16

Thoroughbred Prizemoney Changes $8.5m Apr-16 (ex Country)

Harness Prizemoney Changes $2.9m Apr-16

Greyhound Prizemoney Changes $2.6m Apr-16

Country Racing $4.2m Jul-16

Marquees and Super Screens $147k Jul-16

Awards Night $178k Immediately

Albion Park Operating Costs $150k Immediately

Camera Control Unit - SKY $300k Jul-16

On-Course Fielding Incentive $783k Apr-16

Key: Confirmed:

17 Tracking Towards Sustainability TBP.001.031.0114

Sustainability Plan Summary of Expenditure Opportunities

Opportunity Expenditure Opportunity Implementation Expected saving in Timeframe FY17 ($)

Clubs – Clarification of Roles • The budget for FY16 anticipated approximately $16.2m (8% of total expenditure) would be paid Refer following page. Refer following page. by RQ to or on behalf of clubs. • The consultation feedback suggests that roles and responsibilities of the clubs versus RQ have been blurred. • To address this, RQ considers that the following are required: • Clarification of the roles and responsibilities of clubs versus RQ; • The introduction of KPIs to incentivise clubs and enhance accountability for expenditure of industry funds; and • The exploration of ways to incentivise clubs to increase their non-racing revenue base. • It is proposed to define the role of the club as ‘to operate and maintain a facility that meets industry standards, to conduct race meetings, to provide training facilities and to provide racing participants with an enjoyable and safe racing experience’. Based on this definition the clubs’ responsibilities would be to: • Maintain the racing surface, equipment and facilities; • Provide training facilities for the racing industry to utilise; • Provide customer and participant facilities; • Meet the operating costs of the racing facilities; • Provide the following racing staff for race meetings: o Barrier attendants o Starters and Assistant Starters o Judge and Assistant Judge o Clerk of Course o Clerk of Scales • Attract customers; • Maximise revenue, including revenue from membership and sponsorship; and • Maintain a connection with the local community. • RQ’s role is proposed as ‘to provide clubs with structured financial and management support in line with financial and non-financial key performance measures’.

18 Tracking Towards Sustainability TBP.001.031.0115

Sustainability Plan Summary of Expenditure Opportunities

Opportunity Expenditure Opportunity Implementation Expected saving in Timeframe FY17 ($)

Clubs – Proposed Subsidy • Based on the deficiencies noted in the consultation process RQ proposes to restructure the RQ to release racing RQ is targeting a Model funding model for TAB clubs so that they are: calendar for FY17 by reduction to the • Held accountable for the use of industry funds provided to them; 31 January 2016. value of club • Aware of their responsibilities; subsidies by $2.5m. • Incentivised to manage facilities in a financially responsible manner; Clubs to provide RQ • Incentivised to attract customers and maintain a connection with the community; and with FY17 budget by A specific purpose • Incentivised to develop non-racing revenue streams. 28 February 2016. incentive fund will be • Information will be made available to participants to enable effective decision making. created for each • As each club has differing circumstances and opportunities, it is proposed clubs provide a In conjunction with club. The estimated submission for operational funding in March of each year for the next financial year. the preparation of the total value of these • RQ will then assess the submission against criteria including: FY17 detailed funds is $1m. • Anticipated costs of track and facilities maintenance; budget, RQ will • Profit from food and beverage sales and admissions; confirm subsidy The total net • The timeliness of reporting track conditions and information to RQ; levels with TAB clubs reduction is • Initiatives to expand revenue streams; and by 31 March 2016. anticipated to be • The race day schedule set by RQ, which may ask clubs to hold meetings on days which $1.5m. provide a higher wagering revenue at the expense of on-course patronage. • A monthly fee payable to each TAB club will then be determined based on RQ’s assessment. • On a monthly basis, clubs will be required to report against financial and non-financial key performance measures, including: • Monthly profit and loss accounts, with explanations regarding significant movements from budget; • Value of sponsorship income; • Value of non-racing related revenue (e.g. markets or functions); • Progress made towards non-racing revenue initiatives; and • Patronage and membership levels, with explanations of movements. • RQ proposes to introduce a series of specific purpose incentive funds based on the level of UBET wagering revenue for each club. These incentive funds are intended to be used for minor repairs and maintenance, asset replacement, minor capital works, diversifying income and improving participant experience. Such funds will be drawn down by clubs subject to appropriate acquittal processes.

19 Tracking Towards Sustainability TBP.001.031.0116

Sustainability Plan Summary of Expenditure Opportunities

Opportunity Expenditure Opportunity Implementation Expected saving in Timeframe FY17 ($)

Jockeys • Jockeys are a significant stakeholder group and perform a vital function for the thoroughbred The allocation of Jockeys will be industry. benefits and returns impacted by • Racing Queensland has a lower riding fee than Victoria and NSW. However, the total cost of fees against the pool of movements to and benefits provided to Queensland Jockeys has increased by 34% over the past five years. money is to be prizemoney levels • The proposed structure is to create a funding pool set at the value of current returns to jockeys. confirmed by the QJA • A significant feature of the proposal is that jockeys, via the Queensland Jockeys’ Association, will prior to 31 May 2016 be able to influence how these funds are apportioned across the following: to take effect from 1 • Riding fees (Riding fees are a non-prizemoney return to owners. For the purpose of efficiency July 2016. and convenience for owner and jockey, riding fees are paid by RQ on behalf of owners) • Superannuation • Insurance • Jockey welfare initiatives • Workcover • The pool will be affected by the quarterly variation of prizemoney throughout the year. • Depending on the priority given to the spending of the pool by the QJA, the percentage of prizemoney paid to jockeys may vary from the existing percentage. • Jockeys share in the upside when revenue allows RQ to increase prizemoney but they will be impacted adversely where lower wagering returns force a reduction in prizemoney. • It is intended to negotiate the total value of the pool on an annual basis in conjunction with the budget process.

Breeding Schemes • RQ currently administers the QTIS and QBred breeding schemes. Changes to QTIS will Refer Following • In addition to increases in prizemoney in FY15, additional funds were allocated to breeding be implemented for Page. incentive schemes. FY17. • Until 30 June 2015, RQ also administered the QGreys breeding scheme, however this scheme was abolished following concerns regarding the overbreeding of greyhounds. • Significant changes were made to the QTIS and QBred schemes following the new UBET Agreement. • Such changes increased the cost to the industry of these schemes and it is not clear whether all changes made had a positive impact on the QLD industry.

20 Tracking Towards Sustainability TBP.001.031.0117

Sustainability Plan Summary of Expenditure Opportunities

Opportunity Expenditure Opportunity Implementation Expected saving in Timeframe FY17 ($)

Breeding Schemes • In relation to the QTIS breeding scheme, RQ proposes the following changes: Changes to QTIS and QTIS: a reduction of • Removal of the 6% breeders bonus; QBred will be $1.56m. • Reduce Saturday Metro levels from $35k to $30k; implemented for • Reduce Provincial levels from $12k to $10k; and FY17. QBred: a reduction • Reduce discretionary QTIS races by $630k. of $990k. • In relation to the QBred breeding scheme, RQ proposes the following changes: • QBred bonuses to be reduced; and • QBred bonus certificates to be discontinued.

Prizemoney – Proposed new • Following the commencement of the new UBET Agreement, prizemoney levels were drastically New prizemoney Refer to Structure increased from 1 October 2014 and were based on revenue levels that were subsequently not structure to be Thoroughbred, achieved. implemented from 1 Harness and • Consequently, wagering revenue did not cover the budgeted prizemoney. A ‘correction’ of the April 2016. Greyhound sections. prizemoney increase is therefore required. • The longer the period prizemoney is set, the higher the risk that actual revenue is not sufficient to meet budgeted prizemoney. RQ needs to be able to react in a timely manner when wagering revenue does not meet budget expectations. • The current prizemoney structure is not directly linked to wagering and therefore does not meet governing principle number 1 that all stakeholders share in the upside and risks. • RQ’s proposal is not dissimilar to the current process. However, RQ is proposing a model that is more transparent, timely and reflects levels of wagering revenue and overall financial performance. • RQ proposes a number of changes to the prizemoney structure for the three codes with the key elements being: • Prizemoney will be adjusted based on a three month rolling schedule depending on RQ’s financial performance against budget. Based on this model, the maximum exposure of RQ is approximately three months; • Prizemoney levels will be advertised when the racing schedules are released; and • A “base” amount of prizemoney will be set, and a “variable” component will be included based on the financial performance of RQ against budget. That will be adjusted in future quarters. • The base and variable prizemoney structure is designed to provide participants with certainty in that their prizemoney returns will not fall below a set level. The structure also provides the opportunity for increased returns as a result of revenue growth.

21 Tracking Towards Sustainability TBP.001.031.0118

Sustainability Plan Summary of Expenditure Opportunities

Opportunity Expenditure Opportunity Implementation Expected saving in Timeframe FY17 ($)

Thoroughbred Prizemoney • The table on page 77 sets out the proposed changes to thoroughbred prizemoney levels. Changes to A reduction of $8.5m • Prizemoney is generally above the level set prior to 30 September 2014, however, prizemoney thoroughbred for non-country and for non-TAB racing has been reduced to $5,500 per race for both strategic and non-strategic prizemoney will be $4.6m for country as venues. introduced from 1 discussed in the • The reduction in prizemoney for non-TAB racing is also as a result of reducing non-TAB races by April 2016. country racing 50 meetings (10 meetings from the Queensland Country Racing Series, and 40 from standard section of this non-TAB events, primarily relating to the reduction of tracks which run between four to seven report. meetings annually to three meetings each). • The number of TAB meetings has been reduced by 10 meetings due to the proposed Proposed TAB discontinuance of the Queensland Country Racing Series as discussed in the country racing prizemoney is an section of this report. increase of 12.6% • The prizemoney for feature races has been reduced by $500,000 as a result of reducing the on FY14 levels. Stradbroke Handicap from $2m in the FY16 budget to $1.5m. Proposed Non-TAB prizemoney reduces by 18.6% on FY14 as a result of the reduction in Country racing. Harness Prizemoney • Due to the significant shortfall Harness is facing in the FY16 budget, prizemoney has generally Changes to harness A reduction of been reduced back to the level at 30 September 2014. prizemoney will be $2.9m. • Whilst RQ has endeavored to include a base and variable component for prizemoney across the introduced from 1 three codes, the reduction in Harness is limited by the penalty thresholds. April 2016. Proposed • As such, no variable component has been proposed for racing outside of that at Albion Park. prizemoney is 1.3% • Should the performance of RQ exceed budget, RQ may consider introducing a variable less than the FY14 component for non-Albion Park harness racing. prizemoney levels. • Feature prizemoney across a number of meetings has also been amended, resulting in a $515k reduction in prizemoney.

22 Tracking Towards Sustainability TBP.001.031.0119

Sustainability Plan Summary of Expenditure Opportunities

Opportunity Expenditure Opportunity Implementation Expected saving in FY17 Timeframe ($) Greyhound • Whilst total prizemoney is proposed to increase by 6.2% from FY14 to FY17, it must be noted that Changes to A reduction of $2.64m. Prizemoney the number of races is proposed to increase by 8% from 5,475 in FY14 to 5,913 in FY17. Greyhound • Under the proposed prizemoney levels, the average prizemoney per race is therefore proposed to prizemoney will be Total proposed prizemoney decrease by 2% from $1,893.54 in FY14 to $1,862.64 in FY17. introduced from 1 is 6.2% greater than FY14 • Greyhounds received a substantial increase to prizemoney following the new UBET agreement. April 2016. levels, however this is a • The proposed new prizemoney levels reduce the per meeting prizemoney levels from FY16 to function of 438 additional FY17 by between 5.3% and 24.7%. However, the per meeting prizemoney at Townsville is races being scheduled for proposed to increase by 14.5% as a result of including two additional races. FY17.

Thoroughbred • RQ proposes the following changes to be implemented from 1 July 2016: Changes to country A reduction of $5.9m in Country Racing 1. The removal of the Country Queensland Showcase Series (which is TAB covered), the racing will be prizemoney, subsidies, Celebrate Country Series and the Sustain Country Series. The feedback from the introduced from 1 QTIS, jockey riding fees and consultations was that the various country racing series do not provide the same level of value July 2016. RQ operational costs, less to the community as standard non-TAB meetings. revenue from the 10 QCRS 2. A further reduction in the number of non-TAB meetings, where clubs that race between four to TAB meetings of $0.6m. seven times a year are reduced to three meetings each. The intention of reducing these meetings is to increase field sizes at nearby TAB courses, allowing clubs to run on a four The proposed sinking fund monthly basis for community benefit. Clubs may obtain funding for an additional race meeting for reinvestment into or meetings from alternative sources i.e. sponsors, regional councils and community action. In country racing is anticipated that event, RQ will facilitate the conduct of any such meeting, agreeing an appropriate date to total $1.1m based on the with the club in question. RQ may also be willing to provide an additional meeting or meetings above savings. subject to the club providing adequate subsidisation of the stewarding and race day costs incurred by RQ. Prizemoney per race reduces from $7,000 to 3. A reduction in strategic and non-strategic prizemoney levels. $5,500. 4. A reduction in the per meeting subsidy payment for strategic non-TAB meetings to $1,000 and limiting the value add prizemoney for non-TAB prizemoney to 50% of sponsorship raised. The intention of this measure is to direct clubs to use sponsorship moneys to maintain facilities and provide community events. • As a longer term strategy, using a portion of the funds saved from the above, RQ intends to develop a regional hub and spoke based model for country racing whereby: • A central hub in each region will be upgraded to TAB status and will race on a regular basis; and • The remaining clubs in the region will race once or twice per year.

23 Tracking Towards Sustainability TBP.001.031.0120

Sustainability Plan Summary of Expenditure Opportunities

Opportunity Expenditure Opportunity Implementation Expected saving in Timeframe FY17 ($)

Thoroughbred Country • The purpose of the hub and spoke model is to derive an income from country racing, which can Refer to prior page. Refer to prior page. Racing be used to: • Improve country racing facilities; • Increase prizemoney to improve returns to participants; and • Provide training to regional areas to ensure racing intellectual property is retained in country areas, which may allow RQ to assess whether a regional stewarding model can be implemented.

Marquees and Super • Over the last two financial years, RQ purchased large marquees and super screens in order to Should it not be Annual saving of Screens provide clubs with the opportunity to ‘rent’ assets to improve the race day experience at a lower economically feasible $147k. cost than available in the open market. to offer this service to • To date there has been an underwhelming response from clubs and the assets have only been clubs, RQ will rented on a handful of occasions. dispose of these • Due to the size and nature of these assets, the maintenance and storage costs are material. assets prior to 30 • With regard to the super screens, RQ budgeted approximately $67.4k of revenue from hire fees June 2016 so that against $116.7k of maintenance and storage expenditure. maintenance and • No revenue was budgeted for the hire of marquees (only $15k was generated in FY2015) against storage costs are not $97.8k for storage and maintenance. incurred thereafter.

Albion Park Operating Costs • In conjunction with the Albion Park Harness Club, RQ is currently undertaking an assessment of Immediately. Targeting a cost the Albion Park facility costs. saving of between • $930k is budgeted for Albion Park facility expenditure in FY2016, including: $160k to $200k per • Electricity of $280k; annum. • Water and waste management of $208k; and • Rates of $24k. • RQ is targeting a cost reduction of $160,000 to $200,000 per annum by: • Reviewing the procedures in place for use of the lights; • Investigating whether management of waste and water can be more efficient; • Enquiring of Council whether rate relief or special grants are available; • Commercialising the lease arrangements for the Albion Park tenants to ensure outgoings are being appropriately on-charged; and • Securing a discount on maintenance when combining service arrangements with the Deagon facility.

24 Tracking Towards Sustainability TBP.001.031.0121

Sustainability Plan Summary of Expenditure Opportunities

Opportunity Expenditure Opportunity Implementation Expected saving in Timeframe FY17 ($)

Awards Night • RQ holds annual awards nights for the three racing codes to celebrate the achievements of Immediately. Annual saving of industry participants. $178k. • In FY15, the cost incurred by RQ to organise and hold the three awards nights was $178k and the same amount was budgeted in FY16. • The awards nights were discussed within the industry consultations and participants confirmed the importance of the events to industry. • The awards nights should continue to be held but on a self funding basis.

Camera Control Unit • The harness clubs currently negotiate a media rights agreement with SKY. From 1 July 2016, Saving of $300k. • Under this agreement, the harness clubs received media rights revenue of approximately $381k and will be assessed in FY14. in conjunction with • RQ currently pays for the SKY vision camera control unit which totals approximately $769k per preparation of the year. Given the harness clubs benefit from this expenditure, it is considered appropriate that a new subsidy model. portion of such expenses are passed on to the clubs. RQ proposes to pass $300k of this cost on to harness clubs in FY17 and will consider passing the full cost on in the future. • In the longer-term, RQ will consider its position in relation to negotiating the SKY agreement on behalf of harness clubs in an effort to provide a better outcome.

On-Course Fielding • Historically bookmakers paid clubs a fee for the privilege of standing on course to take bets. From 1 January Annual saving of Incentive Scheme Currently RQ pays a portion of this fee on behalf of bookmakers, which in FY15 amounted to 2016. $800k. approximately $727k. • This scheme was introduced as the decline in volume of betting on course made it less attractive for bookmakers to stand. • Due to the significantly changed wagering landscape, it is appropriate that bookmakers and clubs come to their own arrangements regarding on course standing fees. • It is anticipated that this will provide a cost saving of approximately $800k against the FY16 budget.

25 Tracking Towards Sustainability TBP.001.031.0122

2. Background TBP.001.031.0123

Background

In April 2015, a Commission Context regarding the last few months Financial outline of Inquiry into the QLD greyhound racing industry • On 9 April 2015, a Commission of Inquiry into the QLD greyhound • Since its formation in FY11, the RQ consolidated group has made racing industry was formed, following a joint investigation by QPS losses ranging between $13.9m and $3.8m. was formed. Deficiencies in and the RSPCA and the subsequent exposé of “live-baiting” • RQ, the parent of the consolidated group, has recorded losses for RQ’s regulatory framework practices within the industry. five consecutive years, resulting in the extinguishment of cash were identified. • On 1 June 2015, Commissioner Alan MacSporran QC found reserves. deficiencies in the regulatory framework in that it did not adequately • On 15 September 2015, the annual report was released, revealing Following the removal of assess risk, nor did it plan an overall strategy to deal with the risk to an $11.2m loss for RQ and a $12.7m loss for the group. RQ’s Board and CEO in June integrity and animal welfare across all three codes. • This is a $7.3m increase on RQ’s FY14 loss, due to a $34.2m 2015, Hon. John Muir QC • Commissioner MacSporran advocated the establishment of QRIC increase in expenditure offset by a $26.9m increase in revenue. was appointed Interim to assume responsibility for racing integrity and animal welfare. • The Government agreed to fund RQ’s operational cash shortfalls as Chairman and Ian Hall • On 4 June 2015, all members of the RQ board and the CEO were RQ embarked on developing a future sustainability process, on the removed and the Hon. John Muir QC was appointed Interim Acting CEO of RQ. basis that such funds will be repaid when RQ is financially able. Chairman. The FY15 annual report • On 4 June 2015, Mr Ian Hall was appointed Acting CEO of RQ. Significant factors decreasing RQ’s profitability disclosed an $11.2m • RQ’s financial performance in FY15 was affected substantially by Discovery of financial position operating loss for RQ. factors including: • Shortly following his appointment, Mr Hall was presented with a Increased greyhound animal welfare costs; RQ has delivered 5 years of draft financial budget that indicated a loss of $21.0m in FY16. o Additional integrity measures; operating losses and has no • RQ subsequently reviewed its FY16 budget and identified o cash reserves to fund approximately $6.0m in savings, which included the following items: o Increased subsidies paid to clubs; ongoing losses. o $2.8m by reducing the planned workforce expansion; o The number of non-TAB race meetings; $1.7m by limiting RQ’s contribution towards club capital works Higher insurance costs due to an increase in cover for jockeys; o o to essential works only; and o A 25% increase in the Thoroughbred Breeding Incentive o $1.3m by reducing RQ’s planned marketing expenditure. Scheme; • Following a review of revenue assumptions a loss of $28.0m is o The closure of both the Eagle Farm and Townsville tracks due forecast for FY16. to upgrades;

o The cancellation of 23 race meetings due to extreme weather; o A $14.7m increase in total prizemoney; and o Lower than anticipated wagering revenue. 27 Tracking Towards Sustainability TBP.001.031.0124

Background

Significant factors decreasing RQ’s profitability (cont.) A stabilisation in wagering FY11 - $2.918bn turnover turnover and the changing • A shift in wagering turnover and the changing nature of industry Oncourse UBET, returns is adversely impacting RQ’s revenue. In particular: Betting Bookmaker, $526.9m, nature of industry returns is Exchange, $56.7m, 2% 18% The wagering market’s move away from traditional pari-mutuel $190.8m, 6% impacting RQ’s revenue. o betting towards fixed odds betting has reduced RQ’s revenue; In conjunction with the Corporates, o There are increased interstate product fees; $493.6m, Government, RQ conducted 17% o Wagering activity through corporate WSPs has increased, whilst consultation meetings with UBET’s wagering turnover has declined from FY12; and stakeholders from all three o Sports’ wagering has continued to grow. codes, animal welfare • The graphs to the right show the increase in corporate WSPs’ share groups and industry staff. of QLD wagering turnover, from 17% in FY11 to 31% in FY15.

This report summarises the Consultation process feedback received from the • Since 4 August 2015, in conjunction with the Government, RQ has Totes, undertaken a series of stakeholder consultation meetings. $1.65bn, 57% consultations, evaluates the financial impact of the • These meetings included stakeholders from all three codes of FY15 - $3.24bn turnover racing, animal welfare groups and industry staff. The purpose was suggested changes and Betting Oncourse to give each group the opportunity to contribute to the discussion Exchange, Bookmaker, UBET, determines a plan for around the industry’s future, while enabling them to communicate $178.3m, $35.6m, 1% $476.8m, 15% creating a sustainable back to their respective members. 6% • From the meetings, RQ identified areas of potential savings industry. Corporates, discussed throughout this report. $1.01bn, 31% This report The purpose of this report is to set out:

o A summary of feedback received from the consultations;

o The financial impact of the suggested changes; and Totes, $1.54bn, o The plan to provide a base for future growth and development of 47% the industry.

28 Tracking Towards Sustainability TBP.001.031.0125

3. What is the Impetus for Change? TBP.001.031.0126

What is the Impetus for Change?

Expenditure is projected to What is the impetus for change? RQ’s current structure is not sustainable exceed revenue by $28.0m in • Expenditure is projected to exceed revenue in FY16. This is • Expenditure, particularly returns to participants, has escalated FY16. This is unsustainable unsustainable without cash reserves. beyond revenue inflow and is not sustainable at the current level. without cash reserves. • RQ needs to address the deficit and formulate a plan that provides • In the 5 years to 30 June 2015, revenue increased by 27% and a platform for growth while delivering a fair and reasonable return to expenditure increased by 30%. This is reflected in the continued RQ needs to address the stakeholders. annual losses RQ incurred over the same period. deficit and formulate a plan • The challenge is to achieve balance across the following elements: • Prizemoney returns across all three codes has increased by 34% over the five years to 30 June 2015, from $90.9m in FY11 to that provides a platform for Expanding and diversifying revenue sources; o $122.2m in FY15, and is forecast to increase a further $6.0m in growth while delivering a fair o Increasing wagering revenue; FY16 on a BAU basis. and reasonable return to o Enriching the experience of participants; • In FY16, RQ will see the full annual impact of the prizemoney stakeholders. increase made on 1 October 2014. In FY15, RQ only paid nine o Improving returns to stakeholders; months prizemoney at this level. In the five years to 30 June o Developing animal welfare programs; • Prizemoney increases in FY15 were based on the new UBET 2015, RQ’s revenue Implementing infrastructure priorities; and agreement and revenue assumptions that did not come to fruition. increased by 27% and o expenditure increased by o Developing and improving community relationships. • The graph below shows the historical and forecast financial RQ anticipates that the budgeted loss 30%. Historical Forecast for FY16 of $28 will reduce due to performance and cash reserve positions. implementing the sustainability Prizemoney has increased measures from 1 January 2016. Government support will allow cash by 34% in the five years to reserves to remain positive in FY17.

40 30 June 2015. RQ to breakeven for FY17 under the 30 Sustainability Plan

Millions 20

10 Break- 0 Even in FY17 (10) FY11 FY13 FY14 FY15 (20) ($4.9m) FY12 ($4.5m) ($3.9m) ($11.2m) ($12.7m) Budget (30) FY16 (40) ($28m) Performance following staged Annual Financial Performance$ Cash Reserves $ Cash Reserves with Government Support $ implementation of sustainability measures.

30 Tracking Towards Sustainability TBP.001.031.0127

What is the Impetus for Change?

RQ’s revenue is driven by RQ’s current structure is not sustainable (cont.) RQ’s revenue gap – all codes wagering turnover. Although • RQ’s revenue is driven by wagering turnover. Although wagering Historical Forecast activity is expected to increase in FY16, RQ’s revenue is wagering activity is expected 260 anticipated to decrease due to: to increase in FY16, RQ’s The increase in wagering activity through corporate wagering revenue is anticipated to o Millions 240 service providers, from which RQ receives a lower return; and $28.0m decrease. The shift towards fixed odds wagering, which leads to a lower 220 o RQ’s revenue increased by return for RQ than traditional pari-mutuel wagering.

200 $26.9m from FY14 to FY15, The current gap however expenditure rose by • The graph to the right illustrates the forecast FY16 deficit of 180 $34.2m during the same $28.0m. period, causing the deficit to • RQ’s revenue increased by $26.9m from FY14 to FY15 due to 160 increase. A $28.0m shortfall increased RIF fee levels and the annual $15.0m fixed fee from the new UBET agreement. is forecast for FY16. 140 FY11 FY12 FY13 FY14 FY15 FY16 • Expenditure rose $34.2m during the same period, partly due to an BUDGET increase in prizemoney, which caused the deficit to increase. Revenue Expenditure

• QLD’s attendance growth is the second-worst nationally. Wagering Performance by Code • It was indicated during the consultations that clubs are reliant on • The table below details the wagering performance per race for the subsidy paid by RQ. However there is a current lack of each code in FY15 and FY14. accountability and concerns that clubs aren’t operating to full

potential or using subsidies for their intended purpose. Code Year Turnover TAB Turnover per Meetings TAB Meeting • QLD has more tracks per capita than other states and the lowest Thoroughbred FY15 2,234.2m 406 $5.5m number of races per track. The high number of tracks results in significant maintenance and infrastructure costs. FY14 2,384.7m 440 $5.4m • Corporate bookmakers are influencing the market away from Harness FY15 438.9m 270 $1.6m racing to sports betting, reducing the return to RQ. FY14 410.0m 314 $1.3m

• QLD based wagering on interstate product has increased, Greyhounds FY15 564.3m 457 $1.2m resulting in higher RIFs paid to interstate racing authorities. FY14 538.0m 443 $1.2m

31 Tracking Towards Sustainability

TBP.001.031.0128

What is the Impetus for Change? Wagering Revenue

The graph to the right details FY15 Actual vs. Budget Net Wagering Revenue for all Codes the budgeted net wagering

18 revenue against the actual 17 net wagering revenue

Millions 16 received for FY15 15 Net wagering revenue for 14 FY15 was approximately 13 $7.9m behind budget due to 12 23 abandoned Thoroughbred meetings and increased race 11 information fee deductions 10 due to higher activity on 9 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun interstate wagering through 2015 Actual 2015 Budget UBET and increased fees charged by southern racing Thoroughbreds First Three Months of FY16 Harness First Three Months of FY16 Greyhounds First Three Months of FY16 jurisdictions.

12 2.7

1.8 The three smaller graphs to 11 2.5 1.7 the right depict the actual 11 Millions 2.3

Millions 1.6 net wagering revenue of 10 2.1 1.5 each code against budget 10 1.9 1.4 for the first quarter of FY16. 9 1.7 1.3 Note that Thoroughbreds 9 1.5 Jul Aug Sep 1.2 Jul Aug Sep was behind budget for the Jul Aug Sep 2016 Actual 2016 Budget first quarter of FY16, 2016 Actual 2016 Budget 2016 Actual 2016 Budget whereas both Harness and Greyhounds were ahead of budget.

32 Tracking Towards Sustainability TBP.001.031.0129

What is the Impetus for Change? – Thoroughbred Code

• Revenue increased by $17.9m from FY14 to FY15 due to: Thoroughbred racing Wagering revenue vs. expenditure – thoroughbred code An increase in RIF revenue; expenditure is forecast to o A share of the annual $15.0m fixed fee resulting from the new exceed total revenue by 200,000,000 o Forecast wagering agreement with UBET; and $14.1m in FY16. 180,000,000 The revenue allocation being based on each code’s actual $14.1m o Thoroughbred prizemoney deficit turnover. increased by $13.7m from 160,000,000 • Despite the large increase in FY15, revenue is projected to FY14 to FY15 and is decrease by $2.5m in FY16 due to the challenges facing the industry outlined on page 27. budgeted to rise a further 140,000,000 • The total number of meetings decreased by 42, from 730 in FY14 to $6.6m in FY16. 120,000,000 688 in FY15. The decrease is represented as follows: Thoroughbred wagering o 34 fewer TAB meetings; and turnover on QLD racing 100,000,000 o 8 fewer non-TAB meetings. decreased by $150.5m from • Thoroughbred wagering turnover on QLD racing decreased by 80,000,000 FY14 to FY15. $150.5m from FY14 to FY15. This decline resulted from: A $36.6m decrease in wagering turnover in respect of UBET; 60,000,000 o and

40,000,000 o A $114.0m decrease in wagering turnover in respect of other wagering operators.

20,000,000 • The closure of Eagle Farm for track redevelopment adversely affected the code’s financial performance as it is QLD’s premier thoroughbred track and meetings were moved to sub-premium - venues. FY11 FY12 FY13 FY14 FY15 FY16 BUDGET • The code currently does not race on Monday or Tuesday in QLD. This is a lost revenue opportunity as the only thoroughbred racing Prizemoney Other Expenditure Revenue revenue RQ receives on these days is from interstate wagering through UBET, for which it has to pay fees to interstate racing bodies. • Despite the reduction in the number of meetings, prizemoney increased by $13.7m from FY14 to FY15 and is forecast to rise a further $6.6m in FY16 on a BAU basis.

33 Tracking Towards Sustainability TBP.001.031.0130

What is the Impetus for Change? – Harness Code

Harness racing had the Wagering revenue vs. expenditure – harness • Harness had the largest loss of the three codes in FY15. largest loss of the three • The code also faces the largest challenge, in that the $10.2m gap codes in FY15. 35,000,000 Forecast has to be closed from approximately $22.0m of revenue. • The $3.8m revenue decrease in FY15 was partly a result of the Harness racing expenditure revenue allocation being based on each code’s actual turnover, is forecast to exceed total 30,000,000 rather than the intercode split applied in previous years. revenue by $10.2m in FY16. • In FY16, revenue is anticipated to fall a further $0.8m, primarily due $10.2m to the budgeted decrease in RIF revenue, while expenditure is In FY16, the code’s revenue 25,000,000 deficit projected to increase by $2.3m. is anticipated to fall by • The total number of meetings decreased by 46, from 329 in FY14 to $0.8m, primarily due to the 283 in FY15, with the decrease made up of: estimated decrease in RIF 20,000,000 o 44 TAB meetings; and revenue, and expenditure is o 2 non-TAB meetings. projected to increase by 15,000,000 • Despite the decrease in race meetings, total prizemoney allocated $2.3m. to the code rose $2.4m from FY14 to FY15 and is forecast to increase by a further $0.4m in FY16 on a BAU basis.

10,000,000 • The code’s QLD wagering turnover increased by $28.9m from FY14 to FY15, however UBET’s turnover decreased by $1.1m during the same period which reflects the growing trend towards corporate 5,000,000 bookmakers.

- FY11 FY12 FY13 FY14 FY15 FY16 BUDGET

Prizemoney Other Expenditure Revenue

34 Tracking Towards Sustainability TBP.001.031.0131

What is the Impetus for Change? – Greyhound Code

Greyhound racing Wagering revenue vs. expenditure – greyhounds • Despite the live-baiting scandal, the greyhound code produced the best financial performance of the 3 codes. expenditure is forecast to 40,000,000 • The $12.8m revenue increase in FY15 was partly a result of the exceed total revenue by Forecast revenue allocation being based on each code’s actual turnover. $3.7m in FY16. • The total number of QLD greyhound race meetings decreased from 35,000,000 Total greyhound prizemoney 581 in FY14 to 565 in FY15. There were 14 more TAB meetings in FY15 than in FY14 and 30 fewer non-TAB meetings. for FY15 increased by $3.8m $3.7m • Total QLD greyhound wagering turnover increased by $26.3m from from FY14 and is forecast to 30,000,000 deficit FY14 to FY15, with the increase attributed to: decrease $0.9m in FY16. o A $1.1m increase in UBET turnover; and 25,000,000 o A $25.2m increase in other wagering operators’ turnover. • The FY15 result included costs associated with the COI for the live- 20,000,000 baiting investigation. As such, animal welfare and integrity related costs exceeded the budgeted amount by approximately $1.0m. This excess was funded through prizemoney cuts, lower appearance 15,000,000 fees and cancellation of the QGreys Breeding Scheme. • Despite the abovementioned cuts to prizemoney, total greyhound prizemoney for FY15 increased by $3.8m from FY14 and is forecast 10,000,000 to decrease by $0.9m in FY16 on a BAU basis. • In FY16, revenue is anticipated to decrease by $3.9m and total expenditure is forecast to decrease $1.4m. 5,000,000

- FY11 FY12 FY13 FY14 FY15 FY16 BUDGET Prizemoney Other Expenditure Revenue

35 Tracking Towards Sustainability TBP.001.031.0132

4. The Structure of the Racing Industry in Queensland TBP.001.031.0133

The Structure of the Racing Industry in QLD RQ’s Funding Structure

Interstate Wagering Jockeys/Drivers The diagram to the right sets Racing Infrastructure 1 Prizemoney out RQ’s funding inflows UBET Fund Sports Wagering and outflows. Trainers Product Fee

The structure is complex Wagering Revenue Breeding Incentives due to the significant Owners QLD Wagering Corporates number of stakeholders, who are all interlinked. Media Rights RIF Deductions Interstate Racing Bodies

QLD Government Media Payments to Clubs Grants/Contributions Clubs

Industry Infrastructure Scheme Third Party RQ Contributions Nomination Fees Grants/Subsidies Training Track Subsidy Licence/Registration Capital Projects Participants Fees Jockeys2

Racing fees Employee Expenses Racing Expenses

Industry Insurances Supplies and All other income Services

All Other Expenses

1 UBET wagering revenue is divided into QLD wagering and interstate wagering, of which 49.7% relates to QLD and 50.3% to interstate. 2 Paid by owners and collected by RQ.

37 Tracking Towards Sustainability TBP.001.031.0134

The Structure of the Racing Industry in QLD Participants

Industry participants and the Participants Animal Welfare wagering market are • As illustrated in the diagrams on this page, the industry participants interdependent. and the wagering market are interdependent. That is: Owners Breeders Trainers o Without owners, there would be no horses or greyhounds; All participants play a part in Without trainers or jockeys/drivers, the horses and greyhounds the racing industry and have o would be unable to race; Drivers Clubs a part to play in ensuring the Harness Without clubs, there would be no venue management; sustainability of the racing o Without wagering service providers, there would be no revenue; industry. o and Wagering Trainers Breeders o Without RQ, there would be no industry management or Market regulation. Greyhound Thoroughbred Clubs • All participants play a part in the racing industry and have a part to Owners play in ensuring the sustainability of RQ and the industry as a whole. Breeders • The sustainability plan, prepared after extensive consultation with Clubs Owners Trainers Jockeys industry stakeholders proposes changes necessary for the sustainability of the industry. It endeavours to balance the interests of the various participant groups.

Jockeys/ Wagering Wagering Return to Breeders Owners Trainers Clubs Drivers Product Market Stakeholders

38 Tracking Towards Sustainability TBP.001.031.0135

The Structure of the Racing Industry in QLD Comparison of Thoroughbred Racing to other States

QLD NSW VIC SA WA Set out to the right is an Clubs 115 120 68 24 35 excerpt from the Early Tracks 104 115 68 23 36

Edition of the Racing Race Meetings 677 738 549 196 296 Australia Fact Book for Flat Races 4,470 5,280 4,276 1,451 2,243 2014/15. Jumping Races - - 66 21 - In comparison to the other Total Races 4,470 5,280 4,342 1,472 2,243 jurisdictions, Queensland Flat Horses 7,420 10,452 8,747 2,951 3,873 has a substantially larger Jumping Horses - - 174 72 - proportion of jockeys, clubs and tracks. Total Horses 7,420 10,452 8,921 3,023 3,873 Flat Starters 41,809 51,786 42,407 13,984 23,047

Jumping Starters - - 520 144 -

Total Starters 41,809 51,786 42,927 14,128 23,047

Prizemoney $91,694,388 $163,682,100 $158,215,163 $32,958,000 $57,070,625

Incentive Scheme Payouts $6,329,101 $10,525,894 $7,661,250 $1,440,550 $5,567,856

Other Returns to Owners $26,032,218 $17,146,744 $17,800,000 $3,629,634 $6,025,602

Subtotal Returns to Owners $124,055,707 $191,354,738 $183,676,413 $37,736,892 $68,664,083

Fees Paid by Owners ($7,641,351) ($5,646,350) ($10,415,168) ($2,132,820) ($3,016,950)

Total Returns to Owners $116,414,355 $185,708,388 $173,261,245 $35,604,072 $65,647,133

Bookmakers 72 168 176 12 -

Trainers 804 953 825 270 515

Jockeys 160 149 136 37 62

Apprentice Jockeys 81 85 44 19 27

Amateur Jockeys 8 21 29 - 37

Total Riders 249 255 209 56 126

39 Tracking Towards Sustainability TBP.001.031.0136

The Structure of the Racing Industry in QLD Comparison of Thoroughbred Racing to other States

Set out to the right is an QLD NSW VIC SA WA excerpt from the Early TAB Meetings 404 615 502 187 270 Edition of the Racing Non-TAB Meetings 273 123 47 9 26

Australia Fact Book for Total Meetings 677 738 549 196 296 2014/15. TAB Races 3,051 4,611 4,052 1,420 2,086

A significantly higher Non-TAB Races 1,419 669 290 52 157 number of Non-TAB Total Races 4,470 5,280 4,342 1,472 2,243 meetings and races are run TAB Starters 30,350 46,638 41,034 13,743 22,125 in Queensland than in the Non-TAB Starters 11,459 5,148 1,893 385 922 other jurisdictions. Total Starters 41,809 51,786 42,927 14,128 23,047

40 Tracking Towards Sustainability TBP.001.031.0137

The Structure of the Racing Industry in QLD Purpose and Values

QACRIB trading as RQ is a RQ’s purpose RQ’s values statutory body established QACRIB trading as RQ is the control body for all three codes of racing • The values that underpin the behaviour of the people at RQ are the under the Racing Act 2002, in QLD and is a statutory body established under the Racing Act 2002. transparent and consistent application of RQ policies and procedures. which coordinates, manages RQ coordinates, manages and regulates the industry by: • RQ’s primary customers are the participants in, and stakeholders and regulates all three codes • Administering the rules of racing; of, racing in QLD. RQ seeks to work collaboratively with these of racing in QLD. • Implementing sound policies; stakeholders, including all levels of Government, stakeholder representative groups and special interest groups to achieve the • Enforcing safety and integrity standards; organisation’s objectives and deliver a prosperous racing industry • Licensing industry participants; for QLD. • Licensing clubs and monitoring their activities and performance; • RQ uses numerous communication channels to build and maintain its relationships with racing industry participants and other • Monitoring the condition of racecourses and working with clubs to interested parties to receive feedback and suggestions about its ensure courses are developed to a suitable standard; activities and direction. • Commissioning and undertaking research and promotional activities;

• Administering industry funding and commercial agreements;

• Identifying, assessing, developing and implementing responses to strategic issues; • Identifying priorities for major capital expenditure; • Managing the redevelopment of existing, and the construction of new, racing infrastructure; • Representing the QLD racing industry on industry peak national bodies and their subcommittees; and • Developing and implementing plans and strategies for developing, promoting and marketing the QLD racing industry.

41 Tracking Towards Sustainability TBP.001.031.0138

The Structure of the Racing Industry in QLD Business definition

Service Description Set out to the right are the Stewarding, The department is made up of the operational steward’s panels, Integrity Regulatory Unit, Betting Compliance and Monitoring descriptions of each of the Integrity and Division, Veterinary Services Division and Licensing and Registrations Division. Its purpose is to provide the highest level of services provided by RQ. Licencing integrity services to the industry’s participants and supporters. The expansion of animal welfare services and the imminent Services restructure of Integrity services in light of the COI is a key priority. Animal Welfare RQ works closely with the RSPCA, Biosecurity Queensland and QPS to enforce rules and regulations around animal welfare Services practices. Implementing recommendations from the MacSporran COI will be a key priority area for RQ. Training As an RTO, RQ offers nationally recognised training with funding assistance from DET. RQ provides ongoing industry- standard training and mentoring to apprentice and working jockeys/drivers, trainers, stable hands, trackwork riders and strappers as well as industry employers. All programs delivered are from qualifications in the nationally recognised Racing Training Package. Racing Responsible for developing the most innovative and effective allocation of race dates as well as allocating prizemoney and Operations developing state-wide racing programs and feature race schedules that maximise wagering returns. The division also provides: • Representation on the Australian Pattern Committee and the National Racing Committee; • An interface with the RISA Service Centre and the provision of handicapping services across the codes to the state; and • Management of breeding schemes. Infrastructure Key function is to deliver key projects conforming with the Industry Infrastructure Strategy to create modern, 21st Century and Safety racecourses, multi-purpose sports stadia and entertainment precincts. Finance and IT Responsible for policy and performance across the three codes of racing in the following areas and services: Information technology, prizemoney distribution, risk and compliance, commercial and industry analysis, industry insurances and club subsidy distribution. Strategy, Responsible for creating a sustainable industry for participants by maximising wagering revenue. Marketing and The division maximises exposure and engagement in the industry’s three racing codes amongst the sports’ constituents and Communications the broader community via its advertising and marketing programs. Media accreditation for QLD racecourses is open to all practising media representatives but it is subject to RQ’s approval. RQ also develops implements and administers RIF across the corporate bookmaker network. RQ is responsible for the control of racing bookmakers in the state of QLD. Presently there are 140 licenced racing bookmakers operating at registered race meetings.

Internal Audit Responsible for examining, evaluating and monitoring the adequacy and effectiveness of controls that exist to regulate the activities and operations of RQ. Internal Audit maintains a program for the auditing of clubs, including financial and governance aspects, as part of the annual Internal Audit Program.

42 Tracking Towards Sustainability TBP.001.031.0139

5. Consultation Process and Outcomes TBP.001.031.0140

Consultation Process and Outcomes The Consultation Process

About the consultation process • Participants were asked to identify areas where savings could be The purpose of the • Consultations were held with industry stakeholders to seek input on made that would allow RQ to operate at a surplus from 1 July 2016. consultation process was to ways to improve public confidence and integrity in the industry • The meeting with animal welfare stakeholders focussed on seek input from regarding the welfare of racing animals and the transparency of the reporting the progress of recommendations from the MacSporran stakeholders to identify racing industry’s commercial operations. Report and capturing input on the group’s animal welfare goals for measures to place the • A discussion paper was released and an option for the public to the industry and suggestions for key outcomes and indicators for make an online submission was made available. QRIC. industry on a financially • The key themes identified in the consultations are discussed in sustainable footing. • The following consultation meetings were held between 4 August 2015 and 3 September 2015: detail on the following pages. Consultation meetings were o Thoroughbred code; What are the industry’s expectations regarding RQ’s role? held with representatives o TAB thoroughbred clubs and country racing associations; From the consultation process, RQ learned that the industry expects it from all codes. o SEQ thoroughbred clubs; will: o Harness code; • Be a sustainable organisation and maximise revenue to pay o Greyhound code; satisfactory returns to participants; o Infrastructure strategy; • Operate as an RTO, providing nationally recognised, industry- o Central QLD thoroughbred clubs and country racing standard training and mentoring; associations; • Provide subsidies to clubs to maintain their financial viability; o Far North/West thoroughbred clubs and country racing associations; and • Improve participation in QLD racing, despite the increasing interest in sports wagering; o Animal welfare organisations. • A number of other stakeholders were consulted including leading • Be fair and transparent with all stakeholders; breeders, owners, trainers and jockeys, syndicators, and the • Promote a sustainable breeding industry; and Queensland Country Racing Committee. • Maintain a high standard of integrity, particularly in matters • An additional meeting was held with the clubs to examine models surrounding animal welfare. for infrastructure planning, funding and development. • All stakeholders, except animal welfare stakeholders, were presented with comprehensive financial data, including code- specific financial positions and RQ’s historical financial position. • The racing industry stakeholders were surprised and concerned about RQ’s financial position.

44 Tracking Towards Sustainability TBP.001.031.0141

Consultation Process and Outcomes Summary of Options from Consultation Process

Stakeholder Summary of proposals and statements made by various participant groups The key suggestions that arose from the stakeholder Breeders • Document the breeding/retirement cycle of racing animals. • Cut 4 year old QTIS bonus. consultation process are summarised in the table to Owners • Document the breeding/retirement cycle of racing animals. • Pay a significant bond upon registration of greyhounds that is surrendered if not compliant with animal welfare post-racing. the right. • Pay jockeys’ riding fees for non-TAB races. • Increase percentage of QTIS horses in all five first sessions of Magic Millions sale.

Trainers • Document the breeding/retirement cycle of racing animals.

Jockeys • Maintain prizemoney at current levels. • Reduce riding fees for provincial/country racing based on the type of meeting. • Buy own protective equipment once they have completed their apprenticeship. • RQ to maintain both medical and psychological support for jockeys.

Clubs • Maximise land use at Albion Park, proposed Gold Coast venue and Marburg redevelopment. • Consolidate country thoroughbred clubs into a regional hub model and provide a regional pool of staff. • Develop new revenue streams. • Apply to Government as an industry to gain a capability development package. • Schedule annual Cup Day for each club to maximise profit. • Build relationships with local councils regarding track maintenance. • Fund country racing obligations through the $1m Government commitment and pay other costs through other sources of funding. • Sponsorship funds to contribute to cost of track upkeep and maintenance, not added to prizemoney. • Increase the number of TAB clubs. • Change some racing from Saturdays to weekdays and maximise returns by staggering start times at regional tracks. • Trial night racing to maximise revenue. • Appoint an independent panel for preliminary assessments of infrastructure applications. • Lease equipment. • Clarify the roles of RQ and clubs. • Review race programming.

45 Tracking Towards Sustainability TBP.001.031.0142

Consultation Process and Outcomes Summary of Options from Consultation Process

Stakeholder Summary of proposals and statements made by various participant groups The key suggestions that RQ • Sell the “big screen” and marquees. arose from the stakeholder • Examine operating costs and reduce overheads to 15% of total expenditure. consultation process are • Proactively promote positive stories about the industry. summarised in the table to • Consult with industry regarding budget situation, including month-by-month statements to understand the actuals. the right. • Clarify the roles of RQ and clubs. • Undertake statistical analysis of the number of racing horses that end their lives at the abattoir. • Negotiate a new deal with SKY for better coverage. • Review race programming. • Influence UBET performance and profile to increase wagering returns, by maximising on-course presence of UBET, installing on-course self service terminals and introducing geo map wagering to identify QLD wagering. • Build new audiences across all codes. • Provide clubs with their wagering data in order to set targets. • Support a more collaborative culture across all codes. • Redistribute funds allocated to greyhounds and invest in infrastructure to gain TAB status at two clubs. • Approach Tourism and Events Queensland to develop a whole of industry racing “tourism” grant for annual country events. • Educate the public regarding access to live feeds on mobile devices. • Negotiate with UBET regarding the value to clubs of lost signage revenue. • Maintain both medical and psychological support for jockeys. • Decrease prizemoney for public holiday races and provincial races that are moved. • Leverage the additional prizemoney allocated to Magic Millions day by requesting Magic Millions pay more of the costs towards the day and provide additional sponsorship to industry events. • Cut 4 year old QTIS bonus. • Establish an industry sinking fund

QRIC • Appoint a welfare officer for the harness code. • Set KPIs for industry accountability regarding animal welfare. • Enforce minimum quality standards for kennels and stables. • Publish code-specific reports. • Set best-practice disease prevention measures for industry. • Ensure compliance in tracking/reporting animals post-racing.

Whole • Develop position on how to deal with staff testing positive for drugs. industry

46 Tracking Towards Sustainability TBP.001.031.0143

Consultation Process and Outcomes Observations from the Consultation Process

Theme Summary of proposals and statements made by various participant groups The table to the right sets Increasing • A proactive approach is required to counter the impact of the rise of corporate bookmakers on the wagering return to out the key observations revenue RQ. from the consultation • Currently, clubs get no direct benefit from their wagering turnover. Clubs do not receive the wagering data from their process. own courses and do not know the revenue they generate. • The clubs have no direct influence over SKY and UBET, which are the key drivers of wagering returns. They want RQ to drive change with UBET and SKY. • There is strong support to revise race scheduling to maximise wagering returns by decongesting current racing schedules, increasing SKY coverage and aligning QLD racing with other states and international racing events. • Non-TAB racing impacts on the race scheduling on TAB racetracks and jockey availability. • QLD racing has an ageing demographic, reflected in industry stakeholders, audiences and wagering patterns (apart from greyhound wagering which maintains its share of the younger demographic). Its ageing infrastructure is unable to compete with clubs and other venues in attracting new audiences. • All clubs recognise the need to increase and diversify revenue. There are racing-related and non-racing commercial opportunities, however many clubs are struggling to find a profitable revenue channel. Club managers require the appropriate management skills to operate a commercial business. • A “stamp duty” levied on the sale of thoroughbred horses.

Jockeys • Jockeys should be treated as contractors, as the status of jockeys as potential employees would mean an unsustainable level of costs relating to protective equipment, superannuation and WorkCover. • Currently, jockeys want the benefit of being employees, but their work cannot be directed. They have the veneer of contractors and they behave like contractors. • 58 jockeys only ride a couple of times a year, however WorkCover payments do not take this into account. • The cost of jockey apprenticeships was not regarded as unreasonable, however it was queried why RQ operates its own RTO instead of outsourcing this function.

Prizemoney • There is reluctant acceptance across all codes that the current levels of prizemoney are not sustainable in the current financial climate. • There was a general agreement that prizemoney levels could be cut for public holiday and country racing.

47 Tracking Towards Sustainability TBP.001.031.0144

Consultation Process and Outcomes Observations from the Consultation Process

The table to the right sets Theme Summary of proposals and statements made by various participant groups out the key observations RQ • Participants voiced concern over RQ’s previous lack of governance, transparency and poor financial management that from the consultation resulted in the current financial crisis. process. • RQ’s previous lack of consultation and collaboration with the industry was highlighted in every meeting. • The UBET agreement was negotiated without industry engagement and stakeholders expressed concern that RQ is tied into a 30-year agreement with UBET when the trend is moving toward online wagering.

Integrity and • There is support for the establishment of Queensland Racing Integrity Commission (QRIC) and a separation of the animal welfare commercial and integrity functions of RQ. • A legislative, investigative, education and compliance framework is essential to ensure the integrity of the racing industry and the welfare of all racing animals. • There is a generally high level of acknowledgement that public confidence in the industry demands a “clean” industry. • There is not a single “position” regarding the post-race retirement welfare of racing animals. • There are significant challenges regarding re-homing racing animals, including re-training, cost of upkeep, availability of appropriate placements, failed placements, current practices of some owners and trainers and public acceptability.

Club • Clubs struggle to make a profit and rely on the subsidy payment from RQ to offset the cost of training and administrative maintenance. subsidies Country and • Stakeholders recognise the social role community racing plays in country towns, however RQ is currently funding community country tracks $14.5m above its minimum obligation. racing • A theme raised at a number of meetings was the need to consolidate country race tracks around a “regional hub” that has TAB broadcast facilities. • Non-TAB racing is seen as unsustainable at current levels.

QTIS and • QTIS is strongly supported by thoroughbred stakeholders, except in far north/west QLD, where a cut in QTIS may be QBred acceptable to breeders. • QBred is supported by the harness industry.

Infrastructure • There is general agreement with the 5-year infrastructure strategic plan proposed by the QLD Treasury. However, there is a high level of concern that the infrastructure fund is insufficient to meet the ageing infrastructure issues across the industry.

48 Tracking Towards Sustainability TBP.001.031.0145

6. Sustainability Plan TBP.001.031.0146

Sustainability Plan Consideration of Revenue Opportunities and Expenditure Options

This section of the report Assessment and review of consultation feedback documents RQ’s • RQ has undertaken a thorough review and assessed the feedback assessment of the revenue received throughout the consultation process in order to determine: opportunities and • Opportunities available to RQ to grow revenue, and expenditure options • Options to reduce or limit expenditure. suggested throughout the • Many of the revenue opportunities and expenditure options consultation process. identified provide longer-term solutions and do not impact the immediate deficit. The proposed options to • Longer-term solutions are important for the future sustainability of arrest the $28.0m forecast the racing industry, however the current priority is to implement BAU loss for FY16 are also changes that will provide immediate revenue opportunities and reset expenditure. discussed. • RQ has assessed each of the options against the eleven governing principals of the sustainability plan. • This section of the report documents: • RQ’s assessment of options for the Sustainability Plan, including the resulting financial impact and timing required for implementation, and • The options that will be immediately implemented in order to return RQ to an operating surplus by 1 July 2016.

50 Tracking Towards Sustainability TBP.001.031.0147

Sustainability Plan Revenue Enhancement Options

Revenue Growth FY11 to Preliminary FY17 This section of the report Options for enhancing RQ revenue

250 documents RQ’s Revenue growth is key to a sustainable racing industry in QLD. The Forecast assessment of the various table to the right shows the growth in RQ’s revenue since FY11, which

was primarily driven by a 69% increase in revenue from corporate Millions 16 options available to grow WSPs and the $15.0m annual fixed fee from UBET, received for the 15 16 200 16 186 revenue. first time in July 2015. 14 14 18 182 181 The UBET program and product fee, net of interstate RIF deductions, 16 168 15 162 has reduced by approximately $5.0m from FY11 to FY15, highlighting 17 154 54 50 56 the shift in wagering behavior to corporate WSPs and to fixed odds 151 44 150 35 40 betting, which provides a lower return to RQ. 30 This section of the report discusses RQ’s options for increasing revenue, as suggested throughout the consultation process, including: • Refurbishing Eagle Farm and amending the racing calendar for 100 FY17; 137 • Adjusting RIF charged by RQ; 128 131 132 135 133 136 • Optimising the RQ racing schedule; 50 • Generating revenue from industry assets, including Albion Park, Deagon and the Sunshine Coast; • Making adjustments to various fees and charges on participants - levied by RQ; (25) (26) (26) (29) (35) (36) (36) • Working with UBET to develop strategies to improve the wagering return to RQ; and (50) • Working with SKY to ensure the appropriate broadcast level is FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 being afforded to the Queensland racing industry. UBET Fixed Fee and Sports Total Other Revenue Corporate, Tote and Betting Exchange RIF UBET Race Information Fee Deductions UBET Program and Product Fee Revenue Total Revenue net of Race Information Fee Deductions

51 Tracking Towards Sustainability TBP.001.031.0148

Sustainability Plan Summary of Revenue Opportunities

Revenue Description Implementation FY17 Expected Set out to the right is a Opportunity Timeframe Revenue Level ($) summary of the revenue Refurbishment of • Eagle Farm was closed for renovations through most of RQ will not see the full opportunities identified Eagle Farm and FY15 and is not expected to reopen until May 2016. effect of this until the throughout the consultation amended racing • As such, it only held 10 race meetings in FY15, compared end of FY17. calendar for FY17. with 45 that would be held in a typical year. process. • It is expected that in FY17, Eagle Farm will run its usual 45 A combined $3.8m race meetings and thus increase RQ’s revenue. increase on FY16 Adjustments to RIF • RQ has adjusted its rates and has also introduced an The amended RIF budget. charged by RQ incentive to entice WSPs to increase turnover. structure will be implemented from 1 November 2015.

Optimisation of the • Review the racing schedule to ensure maximised coverage Minor changes to be To be determined RQ racing schedule of RQ’s racing product. implemented from 1 following finalisation focused on • Consider opportunities such as night racing, holding a January 2016, with the of the optimised increasing wagering regular north QLD race circuit between 3 – 4 tracks, turning optimised schedule schedule. revenue. some non-TAB tracks into TAB tracks, and rescheduling fully implemented from Saturday race meetings to weekdays or Sundays. 1 July 2016.

Generating revenue • RQ is reviewing its real property assets to determine their Additional car parking Rental estimate from from industry assets, potential to derive income, such as rental income. and rental revenue may clubs: $75k/p.a. including Albion • Negotiating positive outcomes on land under resumptions be generated prior to Car parking revenue Park, Deagon and plans. FY17. $70k/p.a. the Sunshine Coast Awaiting assessment of other rental opportunities. Investigating • Some of the courses offered are at a significant cost to RQ. Revenue generated To be determined. potential additional • There is the opportunity to offer RQ’s programs interstate from offering RTO revenue streams for and derive additional revenue from the RTO’s existing IP. programs interstate the RTO. may be beyond FY17.

52 Tracking Towards Sustainability TBP.001.031.0149

Sustainability Plan Summary of Revenue Opportunities

Revenue Opportunity Description Implementation FY17 Expected Set out to the right is a Timeframe Revenue Level ($) summary of the revenue opportunities identified Audit of Bookmakers • RQ currently charges different categories of bookmakers RQ has requested To be confirmed. different fees depending on the type of product being offered. proposals to throughout the consultation • Concerns have been raised as to whether bookmakers are conduct audits. process. remitting the appropriate returns to RQ. Audits will be • RQ has requested proposals for an external party to conduct conducted prior to Further details regarding the audits of wagering partners to ensure they are providing RQ 30 June 2016. opportunities is included on with the correct return. the following pages. Fees and charges levied • RQ is responsible under the Racing Act for licensing Updated fee Additional on racing participants participants in the racing industry. structure revenue from (including licence fees) • License fees are set per code and updated each financial year. implemented for licensing fees to • Historically license fees have been maintained at a low level in FY17. be confirmed. order to reduce barriers to entry and encourage participant growth. Increased The increase in • RQ proposes to conduct a review of the licensing structure. scratching fees will scratching fees is • RQ also proposes to increase the scratching fees for be introduced estimated to thoroughbred racing from $40 to $65. immediately. provide RQ with $400k in additional revenue. Increase wagering • Link returns to participants in order to incentivise wagering Continuing. Currently cannot through UBET through UBET. be determined.

53 Tracking Towards Sustainability TBP.001.031.0150

Sustainability Plan Revenue Enhancement Options – Eagle Farm

The major track renovation Eagle Farm at Eagle Farm had a • Throughout the majority of FY15, QLD’s premier race track Eagle detrimental impact on Farm, was closed for its first major track renovation in over thirty years. wagering in QLD during • In a typical year, 45 race meetings are held at Eagle Farm. FY15. However in FY15 Eagle Farm held only 10 race meetings. At present, Eagle Farm is not expected to reopen for racing until May Eagle Farm is not expected 2016. to reopen for racing until • The budgeted loss for FY16 of ($28.0m) took into account Eagle May 2016 and therefore RQ Farm’s closure until May 2016. expects wagering turnover • The reduction in race meetings at Eagle Farm has diminished to remain at similar levels in QLD’s wagering turnover, thus reducing RQ’s wagering revenue in FY16. FY15 and is forecast to do so again in FY16. • The 35 meetings that could not be held at Eagle Farm were moved It is anticipated however that to sub-premium venues. This also reduced the wagering return to there will be a boost to RQ. revenue following the • Looking ahead to FY17, it is expected that Eagle Farm will run its reopening of Eagle Farm. usual 45 race meetings, which will provide a boost to QLD’s wagering turnover and thus increase RQ’s revenue. • In conjunction with the currently proposed RIF structure for FY16 discussed on the following page, RQ has modelled the impact of Eagle Farm running its normal racing calendar and estimates an increase in wagering revenue of approximately $3.8m or 5.7% of total QLD wagering revenue. The $3.8m is comprised as follows: • Increase of $4.7m in race information fees; and • Decrease of $0.9m in the return from UBET due to the shift from pari-mutuel to fixed odds betting.

54 Tracking Towards Sustainability TBP.001.031.0151

Sustainability Plan Revenue Enhancement Options – Race Information Fees

In FY15 QLD was Australia’s Race information fees • Concerns have been raised as to whether bookmakers are remitting the appropriate returns to RQ in line with the fee structure. most expensive racing • RQ receives revenue from corporate bookmakers who offer an on- wagering product. line wagering product. This revenue is a function of legislation that • RQ has requested proposals for an external party to conduct audits requires WSPs to pay a fee for the use of each Australian State’s IP of wagering partners to ensure they are providing RQ with the – its racefield information. correct return. • Under this arrangement, RQ sets a fee for the use of its racefield • RQ is also proposing to work with interstate PRAs to develop information and WSPs who elect to wager on QLD racing must pay policies and procedures to ensure on-course bookmakers are this fee. providing the correct returns to the respective PRAs for the use of their racefield information. Currently the audit of their returns is • In FY15, QLD was Australia’s most expensive racing wagering difficult to administer to ensure full payment of the fee is received. product, as set out in the table to the right. • Whilst the return to RQ from this process may not be material, it is • Under the proposed structure, WSPs would primarily pay the required to ensure QLD is getting its appropriate share from the existing fee level until the WSP reaches a target set above the wagering market and adding to the professionalism of the sport. FY15 race information fee payable by the WSP. When the WSP has reached the target level, the product fee applicable to additional QLD NSW VIC wagering is reduced. 2014-15 Current Current

• In the preparation of the FY16 budget, racefields revenue was RIF Rates estimated to total $50.2m. Tote Standard 1.5% Standard 1.5% Standard 1.5% • As discussed on the previous page, RQ has undertaken preliminary Premium 2% Premium 2.5% Intermediate 2% Premium 2.5% modelling of the impact of the proposed changes to the race information fee structure for thoroughbreds. The modelling Fixed Odds Standard 2% Standard 1.5% Standard 1.5% suggests that thoroughbreds’ racefields revenue may increase by Premium 3% Premium 2.5% Intermediate 2% Premium 3% approximately $4.7m in FY17 on the basis Eagle Farm is reopened by 1 July 2016. Betting Exchange Standard 2.5% Standard 1.5% Standard 1% Premium 3.5% Premium 2.5% Premium 2% Audit of bookmakers Derivative Standard 2.5% Standard 2.5% Standard 1.5% • RQ currently charges different categories of bookmakers different Premium 3.5% Premium 3.0% Intermediate 2% fees depending on the type of product being offered (e.g. standard, Premium 3% premium or derivative racing products). Three code # of races 12,787 22,754 20,667

Three code RIF $43.8m $95.3m $110.2m revenue

Three code average $3,424 $4,190 $5,331 RIF per race

55 Tracking Towards Sustainability TBP.001.031.0152

Sustainability Plan Revenue Enhancement Options

Scratching fees for non- Scratching Fees Rental Income from Albion Park starters have not been • In FY15 there were 21,881 non-starter fees which incurs a penalty • Currently the Albion Park Harness Racing Club and the Brisbane increased since 2003. RQ of $40. Greyhound Racing Club do not pay rental for using the Albion Park Facility owned by RQ. estimates an increase of $25 • This category of scratching fee has not been increased since 2003. • The majority of clubs throughout Queensland either own or lease will result in additional • It is proposed to increase this fee to $65, which RQ considers is still their premises and therefore incur occupancy costs such as a modest amount. revenue of between $400k to statutory charges and or lease fees. • It is expected that this change will result in an increase in revenue $450k. • RQ intends to formalise the occupancy of the Albion Park Facility to RQ of between $400k to $450k, but will also reduce the volume by entering into lease agreements with both Albion Park Harness An additional 60 spaces of scratchings which may assist to reduce the administration Racing Club and the Brisbane Greyhound Racing Club. have been identified for the process. • Based on rental amounts paid by other clubs, it is estimated that car park at Albion Park. RQ Car Parking Revenue the rental fees will total $75,000 per club per annum. estimates that a $70k • A car parking facility is operated at Albion Park which is managed • Additionally, it is intended to ensure the lease agreement provides by Secure Parking. increase in car parking that outgoings are passed on to the respective parties as revenue will result from • In FY15, revenue of approximately $205k was generated from the appropriate. car park. opening such car spaces. • RQ has identified an opportunity to open up an additional 60 car

RQ intends to formalise the spaces, which is estimated to generate an additional $70k in Albion Park Harness Racing revenue per annum. Club and Brisbane • RQ anticipates that the additional 60 spaces will be in operation Greyhound Racing Club’s prior to 30 June 2016. occupancy of the Albion Park Facility by entering into lease agreements.

56 Tracking Towards Sustainability TBP.001.031.0153

Sustainability Plan Revenue Enhancement – Initiatives for Longer Term Revenue Growth

While this report proposes Longer Term Revenue Opportunities SKY short term measures to • Certain factors and initiatives identified in the consultations are • Participants in the consultations identified frustrations with the realign industry revenue anticipated to provide longer term revenue growth for the racing current level of SKY’s coverage of QLD racing. industry. with expenditure and returns • Meetings are underway with SKY to discuss their coverage of QLD • While this report proposes shorter term measures to address the racing, and to discuss potential opportunities to increase coverage. to participants, it is FY16 budget shortfall of $28.0m, it is integral to the sustainability of • As part of the Sustainability Plan, RQ intends to drive engagement imperative to consider the racing industry that initiatives for longer term revenue growth with SKY to ensure the appropriate level of coverage is afforded to are immediately investigated. longer term strategies to QLD racing. grow revenues to improve • Initiatives and factors identified throughout the consultations and in • In this regard, RQ proposes to undertake an analysis of SKY’s discussions with industry participants include: the returns to stakeholders. coverage of QLD racing, including: • The need to work closely with SKY and UBET as they are both • Coverage on SKY 1, SKY 2, Racing Central; RQ intends to work closely crucial to the financial circumstances of the QLD racing industry. with SKY to ensure all • Race lead ins and post race coverage; • Optimisation of the racing schedule to ensure wagering scheduling opportunities are opportunities are maximised. • Race meeting editorial (preview and review); and integrated into the racing • Opportunities for RQ’s RTO to derive additional revenues from • Comparison to southern jurisdictions. calendar. offering its courses and products interstate. • Such information will be used in discussions with SKY to ensure • A review of the assets owned or controlled by RQ to ensure appropriate level of coverage is received. such assets are deriving appropriate revenue streams.

• A review of the licensing structure to ensure industry participants acknowledge the social responsibilities that come with breeding, owning and training racing animals. • Alternate non-racing revenue streams for clubs. • These matters are discussed further in the following pages.

57 Tracking Towards Sustainability TBP.001.031.0154

Sustainability Plan Revenue Enhancement – Initiatives for Longer Term Revenue Growth

UBET • It provides an opportunity to create UBET loyalty; UBET is a crucial financial • Bets wagered with UBET provide RQ with a greater return than bets placed with corporate WSPs or interstate totes. The table • It offers a different experience, in that it makes wagering a partner for the racing below sets out a comparison: social rather than gambling experience; and industry in Queensland. • It affords the best opportunity for mate-get-mate marketing. FY2015 Wagering Returns Turnover Revenue Return Comparison $’bn $’m % • RQ will work with UBET to consider strategies to prevent the Betting through UBET decline of pari-mutuel wagering. This is particularly important as provides RQ with a UBET – QLD there is a 30-year agreement in place between RQ and UBET. substantially higher return Fixed Odds 202 10 5.1% • RQ intends to increase monthly engagement with UBET to than betting through Pari mutuel 275 18 strategically monitor wagering performance and trends. 6.7% Corporate WSPs and the Additionally, RQ intends to monitor UBET’s: UBET – Interstate interstate Totes. • Introduction of new markets; Fixed Odds 644 37 • Timeliness of market release; RQ will work with UBET to Pari mutuel 1,007 67 • Price competitiveness; consider strategies to Less Wagering Expenditure (35) • Novelty markets/bonus bets and special offers; prevent the current decline • Loyalty programmes for QLD domiciled stakeholders and in Net return from UBET interstate 1,651 69 4.2% of pari-mutuel wagering. particular for connections of horses engaged; 2,731 54 Other Totes and Corporate WSPs 2.0% • Sponsorship; and • Signage/marketing and club links. • Over the past five years, wagering turnover with the Corporate WSPs has increased by greater than 100%, while turnover with • From a strategic stance, RQ intends to have continuing UBET has contracted by nearly 10%. This has had a detrimental communication with UBET in relation to race dates and meeting impact on wagering returns to RQ. programming in order to optimise the racing calendar. • The proposed sustainability plan seeks to link returns to participants • The new wagering agreement with UBET also proposed a JV to to increases in wagering through UBET. It is anticipated that this provide a virtual racing product throughout QLD with anticipated incentive structure will assist RQ to increase its wagering revenue. revenue streams in the order of $15.0m. RQ has been advised by Government that the virtual wagering product can not currently be • Pari-mutuel wagering provides a higher return to RQ at lower risk offered in QLD due to exclusivity arrangements with a different than fixed odds wagering. However, the trend in the wagering gambling operator for a similar product. market is to choose fixed odds. • RQ intends to support UBET’s endeavours to determine whether • UBET should take into account the following characteristics of pari- avenues are available to revive the proposed virtual wagering mutuel wagering in its marketing: project given the significant potential revenue stream which could • It provides the biggest return to the QLD racing industry, at the be generated for the industry. lowest risk;

58 Tracking Towards Sustainability TBP.001.031.0155

Sustainability Plan Revenue Enhancement – Initiatives for Longer Term Revenue Growth

UBET cont… • The opportunities to increase wagering turnover through the racing RQ is currently undertaking schedule, and otherwise identified in the consultation process, • UBET has advised RQ that electronic betting terminals will be include: a review of its racing installed at certain race tracks and agencies in early 2016. UBET schedule in order to ensure anticipates that this will improve the race day experience for • Investigate further night racing opportunities; patrons as well as materially increase on-course wagering through meetings are programmed at • Establishing a regular thoroughbred racing circuit between three UBET and therefore provide an increased return to RQ. times which maximise the to four tracks in Northern QLD; Optimisation of the thoroughbred racing schedule opportunity for wagering • Consideration of turning non-TAB tracks that run on a regular • The consultation process revealed a need for the QLD Racing turnover. basis into TAB tracks; and Schedule to be reviewed in order to: • The rescheduling of race meetings from Saturdays to weekdays • Maximise coverage of TAB race meetings on SKY; or Sundays in order to improve SKY coverage and thus increase wagering turnover. • Maximise field sizes at TAB race meetings; • There is an opportunity to move certain race meetings to Monday or • Ensure racing is regular and at consistent venues to provide Tuesday. At present, there are no QLD race meetings on Mondays punters with consistent product; or Tuesdays. This is a lost revenue opportunity, as the wagering • Provide clubs with the best opportunities to maximise meeting market has no option but to bet on interstate races. patronage; and • RQ is aware that certain changes to the racing schedule may be • Better align QLD’s racing schedule with interstate and detrimental to clubs. For example, reducing the number of Saturday international product. meetings will reduce the opportunity for clubs to derive revenue from food, beverage and function packages. • Of all the states, QLD has the highest number of thoroughbred race meetings scheduled on Saturdays. • There is an opportunity to align race meetings with other community events, such as the various Agricultural Shows around the state, in • Due to the size of QLD, RQ also runs a higher number of non-TAB order to increase event patronage. We are working with TEQ to races than any other State. Non-TAB race meetings do not provide pursue opportunities to link racing with these events in order to a financial return to the racing industry. This raises the issue of non- increase race day patronage. TAB races “stealing” horses that could run in TAB races. • Scheduling race meetings at times that maximise coverage on SKY • With only limited ‘slots’ available on SKY, RQ is now reviewing its will result in greater returns to clubs through SKY sponsorship racing schedules to ensure coverage of its racing product is rights. As such, this may reduce the dependence on RQ for club maximised. funding. • Meetings are also being held with SKY to ensure that RQ gets • Benefits should flow from maximising field sizes and increasing the improved coverage. number of races at tracks with the highest turnover. • The financial impact of the optimised racing schedule can not be determined until the amendments have been finalised.

59 Tracking Towards Sustainability TBP.001.031.0156

Sustainability Plan Revenue Enhancement – Initiatives for Longer Term Revenue Growth

The QLD racing industry Country racing • The Government has advised that in 2016 they will fund the prizemoney for country clubs which run once a year. Based on the • Thoroughbred racing delivers significant social and community provides a substantial current schedule, this funding is estimated to amount to benefit for regional communities. number of jobs and also approximately $830k in FY17. • RQ has a legislative requirement to contribute 5.32% of the net delivers economic and • Additionally, RQ is proposing two measures to assist clubs to UBET program and product fee as prizemoney towards country community benefit to become more self-sufficient including: racing in QLD. metropolitan and rural QLD. • RQ will prepare a factsheet for country clubs setting out • In FY15, RQ paid $5.32m in prizemoney to country racing above avenues to increase racing and non-racing revenues. the legislative requirement. In addition to prizemoney, RQ incurred a number of other expenses to facilitate country racing, as set out in • RQ will create a club liaison officer to assist clubs in identifying the below table: avenues for increasing racing and non-racing revenue streams.

Description of Cost FY15 $

Club administration/subsidy payments 1,102,097

Jockey riding fees 2,582,825

Jockey 1% of prizemoney towards welfare and insurance 148,196

Subsidisation of insurance 200,000

SKY Channel costs 156,055

Wages 366,024

QCRC 11,854

Travel and communications 120,738

RISA Service Centre costs 102,628

TAB prizemoney at non-TAB clubs 4,520,000

TOTAL 9,310,417

• While country racing provides a significant community benefit, there is no financial return to RQ.

60 Tracking Towards Sustainability TBP.001.031.0157

Sustainability Plan Revenue Enhancement – Initiatives for Longer Term Revenue Growth

Registered Training Organisation - Potential Revenue RQ is currently exploring Opportunities avenues to increase revenue • As a registered training organisation, RQ offers nationally recognised training with funding assistance from DET. through the RTO by offering existing courses to • RQ provides continuing industry-standard training and mentoring to apprentice and working jockeys, drivers, trainers, stable hands, interstate students. trackwork riders and strappers as well as other industry employees. All programs delivered are from qualifications in the nationally recognised Racing Training Package. • A number of the courses offered are at a significant cost to RQ, particularly the jockey apprenticeship program. • RQ is looking for opportunities to increase funding for the jockey apprenticeship program. • A suggestion was made during the industry consultation that RQ explore the introduction of a ‘user-pays’ system whereby apprentices who enroll in the program will be required to pay off their training after they start deriving an income from racing. This may be considered in the future. • RQ is currently exploring avenues to increase revenue through the registered training organisation by offering existing courses to interstate students. The quantum of potential opportunities is being assessed, but until external contracts are secured, RQ will not include additional revenue from training in its forecast models. RQ has commenced discussions with interstate PRA’s to work with them to deliver interstate training using RQ’s material.

61 Tracking Towards Sustainability TBP.001.031.0158

Sustainability Plan Revenue Enhancement – Initiatives for Longer Term Revenue Growth

RQ is undertaking a review Revenue from industry assets Licensing and Registration Fees of its property assets in • RQ owns the following real property assets: • As noted in section 4, RQ has a responsibility under the Racing Act to license the participants of the racing industry. order to understand each • The Albion Park facility • A licensing fee structure is currently set for each of the three codes, asset’s potential to derive • The Deagon facility as well as a separate set of fees for clubs. income. • Land at Slacks Creek • The fees are set and updated each financial year. RQ has an obligation under • The Bowen Racecourse • Historically license fees have been maintained at a low level in the Racing Act to license the • Through its subsidiaries, RQ also holds an interest in: order to reduce barriers to entry and encourage increased industry participants in the racing participation. • Corbould Park, Sunshine Coast, and industry. • There has been only marginal increases to license fees in recent • Callaghan Park, Rockhampton years. RQ intends to undertake a review of the licensing and The license and registration • RQ is undertaking a review of these assets in order to understand registration fees in order to: fees are generally low in each asset’s potential to derive income, by way of rental return, or • Reflect the social responsibilities associated with the breeding, order to encourage industry by ensuring that outgoings are being on-charged where owning and training of racing animals appropriate. participation. • Encourage quality rather than quantity of racing animals • A limited number of clubs benefit from the use of these facilities RQ intends to review the without contributing a commercial rent. • Add professionalism to the industry licensing fees to reflect the • The level of support provided by RQ to such clubs needs to be • Obtain a reasonable contribution to the increasing costs social responsibilities considered in comparison with the wider racing community which associated with animal welfare initiatives. generally bear their own premises costs. associated with the racing of • Under the variable returns model, it is anticipated that increases to animals and also to add • RQ estimates club rental returns may total approximately $150,000 revenue from increased license fees will flow through to increased in FY16, and will shortly commence formalising such arrangements. profit, thus providing an opportunity to increase distributions to further professionalism to participants. the industry. • Whether parts of some of these assets can be sublet to third parties to supplement income is also being considered. Alternate Revenue Streams through Investment in Infrastructure • As part of this review, RQ is also considering the operational costs • Developing alternate revenue streams often requires capital for each asset to ensure efficient operation is being conducted and investment. also reviewing if grants or concessions are available to reduce • Due to the limited funds available for infrastructure projects, a ownership costs. review of the infrastructure process is being conducted. • Negotiations have commenced to ensure appropriate compensation • Refer to page 86 for further details. is being pursued for land subject to resumption.

62 Tracking Towards Sustainability

TBP.001.031.0159

Sustainability Plan Expenditure Options

This section of the report Overview documents RQ’s • As noted earlier, immediate action is required to provide a break assessment of the feedback even trading position from 1 July 2016 onwards. Share of RQ Expenditure FY16 Budget received in the consultations • The opportunities to increase revenue include many longer term solutions, and as such, options to reduce expenditure require close regarding potential avenues QRIC, 7.5% consideration. to reduce expenditure in line • This section of the report documents RQ’s assessment of the RQ, 10.8% with the general principles. feedback received in the consultations regarding potential avenues to reduce expenditure in line with the general principles.

• The table on the right hand side of this page outlines returns to Other industry participants as a percentage share of RQ’s costs. The Participants, 0.9% following points are noted: • Prizemoney is the largest return to industry at 61% of expenditure and returns. Ensuring that all other industry costs Clubs, 8.0% are efficient is an essential component of increasing returns to industry from prizemoney. • Club subsidy payments and other expenditure incurred by RQ on behalf of clubs total 8%. Feedback received in the consultations suggest the split of roles between clubs and RQ Breeding are unclear. Schemes, 4.6% • Returns to jockeys excluding prizemoney totals 6% of RQ’s expenditure, including riding fees, superannuation, jockey welfare, insurance initiatives and Workcover. Returns to Jockeys (inc jockeys have increased by 34% over the past five years as Prizemoney), Prizemoney, greater benefits have been provided to jockeys by RQ. 8.8% 59.5% • Breeding schemes represent 5% of industry expenditure and in FY16 changes were made to the QTIS and QBred schemes. • The graph to the right does not specifically set out the cost of Country racing as its costs are split among the various participants.

63 Tracking Towards Sustainability TBP.001.031.0160

Sustainability Plan Summary of Expenditure Opportunities

Area of Saving Expenditure Opportunity Implementation Expected Set out to the right is a Timeframe saving in FY17 ($) summary of the expenditure opportunities identified Clubs • Clarify the roles and responsibilities of clubs vs. RQ. TAB Clubs will be $1.5m p.a. net throughout the consultation • Introduce KPIs to incentivise clubs and to be accountable for the expenditure required to submit of the specific process. of industry funds. their FY17 budget purpose fund • Examine the current club funding model and restructure the funding model for proposal to RQ in pools. Further details regarding the TAB clubs, with each club required to provide a submission for operational March 2016. various opportunities are funding each year and report against KPIs on a monthly basis. • Make clubs responsible for minor capital works and submit an application for included on the following funding from the racing infrastructure fund for major works. pages. • Place onus on clubs to grow non-racing revenue.

Jockeys • Set the financial returns to jockeys (including prizemoney) at the current level. The allocation of Jockeys will • Assign the allocation of the financial return against prizemoney, riding fees, benefits and be impacted Workcover, etc. in conjunction with the QJA. returns against the by a reduction • Create a new jockey licence category for trackwork riders to reduce the pool of money is to in number of racing jockeys and therefore reduce the Workcover premium. be confirmed by prizemoney. the QJA prior to 31 May 2016 to take effect from 1 July 2016.

Breeding Schemes • Remove the 6% breeders’ bonus from the QTIS scheme. Changes to QTIS $1.56m for • Reduction in bonuses for Metro thoroughbred racing. and QBred will be QTIS and • Reduction in discretionary QTIS bonus races. implemented for $0.99m for • Reduction in bonuses for harness racing, including bonus certificates. FY17. QBred.

Prizemoney - • Proposed reductions to prizemoney levels are set out on page 77. Implemented for $8.5m Thoroughbreds • The introduction of a base and variable prizemoney structure, where a FY17. excluding permanent base prizemoney level is set, and the variable component depends Country on RQ’s financial performance against budget. Racing. • Variable prizemoney is not proposed to be included for non-TAB race meetings.

64 Tracking Towards Sustainability TBP.001.031.0161

Sustainability Plan Summary of Expenditure Opportunities

Area of Saving Expenditure Opportunity Implementation Expected Set out to the right is a Timeframe saving in FY17 ($) summary of the expenditure opportunities identified Prizemoney - Harness • Proposed reductions to prizemoney levels are set out on page 78. Implemented for $2.94m. throughout the consultation • The introduction of a base and variable prizemoney structure, where a FY17. process. permanent base prizemoney level is set, and the variable component depends on RQ’s financial performance against budget. Further details regarding the • The base prizemoney for a number of the race meetings is set at $3,501 per various opportunities are race with no variable component. Should RQ’s profit exceed budget then a variable prizemoney allocation may be incorporated. included on the following • No variable prizemoney is allocated for non-TAB race meetings. pages.

Prizemoney - • Proposed reductions to prizemoney levels are set out on page 79. Implemented for $2.64m. Greyhounds • The introduction of a base and variable prizemoney structure, where a FY17. permanent base prizemoney level is set, and the variable component depends on RQ’s financial performance against budget. • No variable race meetings is allocated for non-TAB race meetings.

Country Racing • The Queensland Country Racing Series will be discontinued (20 race Implemented for $4.22m. meetings) FY17. • RQ will cease to fund an additional 40 of the remaining 268 race meetings • Per meeting subsidies for strategic clubs will be reduced from $3,000/meeting to $1,000/meeting • Non-TAB clubs will be limited to value-adding prizemoney to 50% of sponsorships, and encouraged to spend the remaining 50% on event marketing and facilities maintenance. • A portion of the savings derived from the above will be used to achieve a longer term strategy for Country racing involving a regional hub and spoke model.

65 Tracking Towards Sustainability TBP.001.031.0162

Sustainability Plan Expenditure Options – Clubs

This section of the report Introduction • It is proposed to define the role of the club as follows: sets out the role of clubs • The budget for FY16 anticipated approximately $16.2m (8% of total ‘The role of clubs is to operate and maintain a facility that meets and RQ in relation to the expenditure) would be paid by RQ to or on behalf of clubs. industry standards, to conduct race meetings, to provide training facilities and to provide racing participants with an enjoyable and • Clubs have an important role in racing: costs associated with safe racing experience’ facilitating racing in QLD. • They operate the facilities used to conduct race meetings and • Based on this role, clubs’ responsibilities would be to: training for the three codes; An examination of the • Maintain the racing surface, equipment and facilities; • They provide patrons with an enjoyable experience; current club funding model • Provide training facilities for the racing industry to utilise; • They maintain the racing surface, equipment and buildings; and is also included in this • Provide customer and participant facilities; section. • They often have a connection with the local community. • Meet the operating costs of the racing facilities; • Clubs primarily generate revenue from admissions and food and beverage sales at race meetings, as well as receiving sponsorship, • Provide the following racing staff for race meetings: membership fees, media rights from SKY and administration Barrier attendants subsidies from RQ. o Starters and assistant starters • Feedback received throughout the consultation period suggests o some clubs have become complacent, reactive and believe it is o Judge and assistant judge RQ’s responsibility to resolve the majority of issues, rather than their own. o Clerk of course • Limited suggestions were received regarding an alternate model for o Clerk of scales club subsidies, rather submissions noted that the current model • Attract customers; required an urgent review. • Maximise revenue, including revenue from membership and Roles and responsibilities - clubs sponsorship; and • To address the consultation feedback, the following matters require • Maintain a connection with the local community. attention: • Clarification of the roles and responsibilities of clubs vs. RQ; • The introduction of KPIs to incentivise clubs and enhance accountability for the expenditure of industry funds; and • Incentivising clubs to increase their non-racing revenue base.

66 Tracking Towards Sustainability TBP.001.031.0163

Sustainability Plan Expenditure Options – Clubs

The current club funding RQ’s responsibility to clubs • The subsidies do not acknowledge that the clubs are (in most cases) the custodian of the asset, typically a large parcel of land • RQ’s role is proposed as follows: model has a number of or the right to use it with significant capital infrastructure deficiencies in that there is ‘RQ will provide clubs with structured financial and management requiring constant repair and upgrade. support in line with financial and non-financial key performance limited accountability for the • Lack of communication from RQ to clubs in relation to wagering measures’ use of industry funds, and outcomes hindering clubs in setting wagering targets. • Consideration of the financial and non-financial key performance little incentives for clubs to • The need for subsidies to be adequate to defray operating costs measures is included on page 68 within the discussion regarding as in many cases subsidies are the club’s main income stream. grow non-racing revenue. the proposed club subsidy model. • The inequality of current funding structures across the three

Current club funding/subsidy model racing codes. • There are two main aspects to the current club funding model: • Deficiencies of the current club funding model include: • An annual fixed fee based on the number of starters and the • The current model requires little accountability for the use of wagering revenue produced by the race meetings held by the industry funds, apart from clubs submitting monthly financial club. This portion is essentially the “facilities” contribution to the statements. club. • The current model does not provide clubs with any incentive to • A per meeting subsidy paid to the club to subsidise the cost of increase patronage or non-racing revenue. Some clubs believe holding each race meeting. RQ will fund their operational losses. • At present, the fixed fee differs per club whilst the per meeting • The current model does not provide adequate scope for asset subsidy is the same except for: regeneration. Instead, pressure is placed on RQ to fund minor • Non-TAB meetings ($3.0k per meeting); and and major capital works. • TAB meetings held at a non-TAB venue ($6.0k per meeting). • Participants raised in the consultations that some clubs have limited opportunities to raise alternate revenue streams. Such alternate Consultation process revenue streams would be likely to reduce clubs’ dependence on • A number of issues in relation to the current model were identified the subsidies provided by RQ. in the consultations, including: • The subsidies are not linked to the out-of-pocket expenses incurred by clubs in order to put on race days. • The subsidies do not reflect that the clubs are (in most cases) the custodian of the asset and have developed and acquired the IP necessary to conduct their businesses.

67 Tracking Towards Sustainability TBP.001.031.0164

Sustainability Plan Expenditure Options – Clubs

Given the differing Proposed new club funding model – TAB Clubs • Value of sponsorship income; circumstances and • Given the deficiencies noted on the previous page, it is proposed to • Value of non-racing related revenue (e.g. markets or functions); opportunities available to restructure the funding model for TAB clubs so that: • Progress made towards non-racing revenue initiatives; and • Clubs are held accountable for the use of industry funds • Patronage and membership levels, with explanations as to each club, RQ is proposing a provided to them; movements. new funding model which • Clubs are aware of their responsibilities; • RQ proposes to introduce a series of specific purpose incentive involves agreeing a monthly • Clubs are incentivised to manage facilities in a financially funds based on the level of UBET wagering revenue for the subsidy amount in March of responsible manner; particular club. Such funds may be used for purposes including each year. • Clubs are incentivised to attract customers and maintain a minor repairs and maintenance, asset replacement, minor capital connection with the community; works, diversifying income and improving participant experience. These funds will be able to be drawn down by clubs subject to The new model also includes • Information is made available to participants to enable effective appropriate acquittal processes. a number of key decision making; and performance indicators to • Clubs are incentivised to develop non-racing revenue streams. • RQ will undertake to provide clubs with wagering information and specific purpose funds pool balances on a monthly basis so clubs incentivise clubs to grow • As each club has differing circumstances and opportunities, it is are kept informed of their performance and the return to the non-racing revenues. proposed that each club provides a submission for operational industry derived from their product. funding in March of each year for the next financial year. RQ proposes to introduce • RQ understands that while some clubs have management skills • RQ will then assess the submission against criteria, including: and industry expertise and experience, smaller venues run by specific purpose incentive • Anticipated costs of track and facilities maintenance; volunteers sometimes struggle to understand their role and meet funds linked to UBET • Profit from food and beverage sales and admissions; their compliance obligations. Previously, RQ has treated minimum standards, financial compliance and race day operations as three wagering revenue for those • Initiatives to expand revenue streams; separate elements within its organisation. particular clubs. • The race day schedule set by RQ, which may ask clubs to hold meetings on days which provide a higher wagering revenue at • As part of the sustainability plan, RQ intends to combine these the expense of on-course patronage; and three functions into one Bureau as a single point of contact for clubs to gain assistance with compliance and financial obligations • The timeliness of reporting track conditions and information to with a dedicated team who understand the pressures of clubs with RQ. experience in that arena. • A monthly fee payable to each TAB club will then be determined • In relation to capital works, it is proposed that clubs will be based on RQ’s assessment. responsible for minor capital works and major capital works will be • On a monthly basis, clubs will be required to report against financial subject to an application for funding from the racing infrastructure and non-financial key performance measures, including: fund. • Monthly profit and loss accounts, with explanations regarding significant movements from budget;

68 Tracking Towards Sustainability

TBP.001.031.0165

Sustainability Plan Expenditure Options – Clubs

Anticipated savings from new club funding model

18.0 • RQ has reviewed the financial statements for TAB clubs across three codes and anticipates the proposed model will provide a substantially more cost effective club operation. Millions 16.0 Target • Placing the onus on clubs to increase non-racing revenues is Savings – designed to reduce reliance on industry funds to subsidise their 15%, $2.5m operation. 14.0 Vet, Farrier, Ambulance, • The FY16 budget includes a $500k provision for clubs’ minor capital Race Day Cleaning, $1.4m works. As minor capital works become the responsibility of clubs under the new funding model, this provision will be removed from 12.0 Other race day RQ’s budget in subsequent financial years. expenses, $2.1m • RQ is aiming for a further saving in the order of 15% of the remaining budgeted club related expenditure, or approximately $2m 10.0 Track annually, however RQ anticipates the incentive funds to maintenance wages, $2.5m Key approximate $1m. categories of 8.0 expenditure Track and to be equipment repairs and considered in 6.0 maintenance, subsidy $3.9m model

4.0

Race day 2.0 staff, $4.3m

0.0 Proposed Model

69 Tracking Towards Sustainability TBP.001.031.0166

Sustainability Plan Expenditure Options - Jockeys

Jockeys are a significant Return to jockeys – background Return to jockeys – consultation stakeholder group and • Jockeys are a significant stakeholder group and perform a vital • The submission from the QJA referred to statistics suggesting 40% perform a vital function for function for the thoroughbred industry. of jockeys will suffer an injury that will keep them out of the saddle for six to eight weeks per annum. the thoroughbred industry • Racing Queensland has a significantly lower riding fee than Victoria and NSW. However the total cost of fees and benefits provided to • The QJA noted that RQ pays a lower riding fee and provides fewer The total cost of fees and Queensland Jockeys has increased by 34% over the past five benefits than the PRAs in the other States of Australia. years. benefits provided to • The QJA acknowledge that RQ organises insurance on jockeys’ Queensland Jockeys has • Excluding prizemoney, under the FY16 BAU budget the 245 behalf as jockeys individual insurance premiums would be jockeys and apprentices across the State are anticipated to receive prohibitive. increased by 34% over the 6% of RQ’s total expenditure by way of: past five years. • RQ funds the jockey’s insurance from a 1% levy on prizemoney. • Riding fees (Riding fees are a non-prizemoney return to owners. • In their submission, the QJA suggested a new jockey license be For the purpose of efficiency and convenience for owner and Racing Queensland has a created for trackwork riders. It is anticipated that this license jockey, riding fees are paid by RQ on behalf of owners); significantly lower riding fee category would reduce the number of racing jockeys licensed and • Superannuation; therefore reduce workcover premiums. than Victoria however, as a portion of revenue • Insurance; • RQ is in the process of discussing the potential savings with Workcover QLD. Queensland Jockeys receive • Workcover; a similar % outcome. • Jockey welfare initiatives; and • Training – i.e. the jockey apprenticeship program. • Victorian payments to jockeys for riding fees, workcover and other welfare programs (but excluding the apprentice program) total $16.472 million from a total revenue of $310.7million or 5.3% of total revenue. (Racing Victoria Annual Report 2014) • In addition to the above payments jockeys receive 5% of prizemoney and incentives.

70 Tracking Towards Sustainability TBP.001.031.0167

Sustainability Plan Expenditure Options - Jockeys

The proposed structure will Return to jockeys – proposed arrangement Returns to Jockeys FY11 to Budget FY16 guarantee payments to • The proposed structure is to create a pool of funds set at the value

20 Queensland jockeys as a of the current returns to jockeys as a percentage of total prizemoney. fixed portion of overall RQ 15 • A significant feature of the proposal is that jockeys, via the Millions expenditure. Queensland Jockeys’ Association, will be able to determine how 10 these funds are apportioned across the following: A feature outcome for 5 • Riding fees (Riding fees are a non-prizemoney return to owners. jockeys from the proposal is For the purpose of efficiency and convenience for owner and - that jockeys, via the FY11 FY12 FY13 FY14 FY15 FY16 jockey, riding fees are paid by RQ on behalf of owners); Budget Queensland Jockeys’ • Superannuation; Jockeys Prizemoney Jockeys Riding Fees and Benefits Association, will control how • Insurance; these funds are apportioned. • Jockey welfare initiatives; and • Workcover. Jockeys Pool of Funds • The pool will be impacted by the quarterly level of prizemoney Jockey throughout the year. Depending on the priority given to the Workcover insurance, spending of the pool by the QJA, the percentage of prizemoney $3.74m, 20.54% paid to jockeys may vary from the existing percentage. • Jockeys share in the upside when revenue allows RQ to increase Barrier trial jockey riding fees, prizemoney. They will be impacted adversely where lower $0.26m, 1.43% wagering returns force a reduction in prizemoney.

• It is intended to negotiate the total value of the pool on an annual Jockeys 1% basis in conjunction with the budget process. prizemoney, Jockey riding insurance and • An example of the proposed jockeys’ pool arrangement is set out fee, $8.29m, welfare, $1.01m, on the following page. 45.5%% 5.54%

Prizemoney – jockeys, $4.92m, 26.99%

71 Tracking Towards Sustainability TBP.001.031.0168

Sustainability Plan Expenditure Options - Jockeys

Baseline FY15 At FY17 PM Levels $10m increase in PM Levels

Category Rate Baseline FY15 Rate Baseline FY15 Rate Baseline FY15 Set out to the right is a comparison of the proposed Public Liability Insurance Fixed 244,544 Fixed 244,544 Fixed 244,544 jockeys’ pool model at FY17 Personal Injury Insurance Fixed 504,057 Fixed 504,057 Fixed 504,057 thoroughbred prizemoney Jockey Welfare Fixed 50,000 Fixed 50,000 Fixed 50,000 levels and if prizemoney was Jockey Distress Fund Fixed 100,000 Fixed 100,000 Fixed 100,000 to increase by $10m. WorkCover Fixed 3,600,000 Fixed 3,600,000 Fixed 3,600,000

Career Benefit Fund Fixed 13,700 Fixed 13,700 Fixed 13,700

5% Prizemoney 5% 4,400,000 5% 4,084,800 5% 4,871,975

Riding Fee 170 5,159,500 170 5,417,475 170 5,688,349

Riding Fee Non-TAB 170 1,948,030 170 1,593,240 170 1,593,240

Barrier Trial Riding Fee @ 35% 60 200,000 60 200,000 60 200,000

Jockey Superannuation 9.5% 694,215 9.5% 685,018 9.5% 710,751

PPE (Helmets) Discretionary Nil Discretionary Nil Discretionary Nil

Total 16,914,046 16,492,834 17,576,616

Total Prizemoney 87,200,000 85,100,000 97,439,500

Total Jockeys as a % of Prizemoney 19.4% 20.3% 18.0%

Target @ 19.4% 16,506,713 18,900,186

Surplus/(Deficit) to Target 13,879 1,323,570

Meeting Count Assumptions

TAB Meetings 404 404 404

TAB Races 3,051 3,051 3,051

Total Starters 30,350 31,868 33,461

Average Starters per Race 9.95 10.44 10.97

Non-TAB Meetings 273 213 213

Non-TAB Races 1,419 1,065 1,065

Total Non TAB Starters 11,459 9,372 9,372

Average Starters per Race 8.08 8.80 8.80

72 Tracking Towards Sustainability TBP.001.031.0169

Sustainability Plan Expenditure Options - Jockeys

The proposed jockeys’ pool 120% model does not alter owners’ 85% share of prizemoney or [SERIES NAME], trainers’ 10% share of 14.4% prizemoney 100% The 14.4% above Jockeys, 5% jockeys prizemoney will not be funded out Trainers, 10% of total prizemoney

80%

60% The jockeys 1% for insurance and welfare will not be reduced Owners, 85% from prizemoney, but 40% Prizemoney Share rather included in the 14.4%

20%

0%

73 Tracking Towards Sustainability TBP.001.031.0170

Sustainability Plan Expenditure Options – Breeding Schemes

Breeding schemes provide Breeding incentive schemes • Reduce Saturday Metro Bonuses – with a view to reducing the • RQ currently administers the QTIS and QBred breeding schemes. difference between the Metro weekend and Provincial bonus the grass root support for levels. This reduction will still see QTIS 2yo and 3yo fillies which • In addition to increases in prizemoney in FY15, additional funds the racing industry. win at Saturday Metropolitans (and taking into account standard were allocated to breeding incentive schemes. proposed prize money as well) amass approximately $64k. Pre- A successful breeding • Until 30 June 2015, RQ also administered the QGreys breeding October 2014, the same victory would have secured the scheme ensures the scheme. This scheme was abolished due to concerns regarding connections $56.5k. the overbreeding of greyhounds. longevity of the industry and • Reduce provincial bonuses – will result in the Metro and • Significant changes were made to the QTIS and QBred schemes Provincial bonuses being paid at the same rate. Midweek Metro provides a quality racing following the new UBET Agreement. races are run at higher prizemoney levels than is the case at product. • The changes increased the cost to the industry of these schemes, provincial meetings but attract lesser QTIS bonuses. and it is unclear whether all of the changes benefited the QLD • The FY16 budget also included a provision for additional QTIS racing industry. races totaling $630k. It is proposed to remove these discretionary bonuses, unless the financial performance of RQ Consultation allows for their inclusion in the schedule racing. • The importance of a defined and robust breeding incentive scheme was noted on a number of occasions in the consultations. • It is anticipated that the above changes will result in a $1.56m saving after considering the strike rate reduction being the • It was also noted from time to time in the consultations that the likelihood that a QTIS registered horse wins or places in a QTIS current QTIS scheme is more of an owners’ scheme than a race. breeders’ scheme, and is really just pseudo prizemoney. • Submissions also suggested that the breeder’s bonus has not QBred – proposed adjustments to the scheme resulted in a higher quality of thoroughbreds in QLD. • RQ proposes the following changes to the QBred scheme: • Limited suggestions were provided in relation to the QBred scheme. • QBred bonuses will be discontinued following the completion of However, one of the state’s premier breeders suggested that the the current season, resulting in a reduction totaling QBred scheme be extended and increased to address the national approximately $1.1m decline of the standardbred breeding industry across Australia. • QBred Stakes races will continue to be raced with stakes levels unchanged. QTIS – proposed adjustments to the scheme • RQ proposes the following changes to the QTIS breeding scheme: • It is anticipated that these changes to the QBred scheme will result in a reduction in scheme benefits of $1.1m, a saving to RQ of • Remove Breeders’ Bonus on the basis that the 2015/16 revamp $990k after applying the strike rate reduction. of the scheme will already provide the potential for significantly better outcomes for both breeders and owners. The fillies and • The number of standardbred breeders in QLD is limited, and mares (50%) increase in bonuses in particular will make racing therefore it is anticipated that the quantum of saving as against the QTIS registered female horses more attractive and accordingly number of participants affected is reasonable. have positive ramifications for the wider breeding industry.

74 Tracking Towards Sustainability TBP.001.031.0171

Sustainability Plan Expenditure Options – Prizemoney

Prizemoney is RQ’s largest Prizemoney - background RQ’s proposal cost and represents 61% of • Prizemoney represents the largest return to the racing industry from • RQ’s proposal is not dissimilar to the current process. However, total expenditure and returns RQ, and is anticipated to be 61% of RQ’s expenditure in FY16. what RQ is proposing is more transparent, timely and reflective of levels of wagering revenue and the overall financial performance of • Currently prizemoney is set based on two broad categories: to industry. the organisation. • Standard prizemoney levels which is set for each code based Currently prizemoney is set • The key proposed changes to the prizemoney structure for the on the type of meeting, i.e. TAB vs. Non-TAB and Metro vs. three codes are: for an extended period of Provincial vs. Strategic. • Prizemoney will be adjusted based on a three month rolling time and RQ is unable to • Feature prizemoney which is set at certain levels to meet class schedule depending on RQ’s financial performance against react to shifts in wagering requirements. budget. Consequently, the maximum exposure to RQ will be revenue in a timely manner. Challenges approximately three months.

RQ proposes to set a base • Following the commencement of the new UBET Agreement, • Prizemoney levels will be advertised when the racing schedules prizemoney levels were dramatically increased from 1 October are released. prizemoney component and 2014, and were based on revenue levels that were subsequently • A “base” amount of prizemoney will be set, and a “variable” a variable component that not achieved. component will be included based on the financial performance shifts in line with • As wagering revenue did not cover the budgeted prizemoney a of RQ against budget. A graphic on the following page provides movements in wagering ‘correction’ of the prizemoney increase is required. an example. It is intended to set the base portion at a high level to provide certainty to the industry regarding prizemoney revenue. • The longer the period for which prizemoney is set, the higher the returns. risk that actual revenue is not sufficient to meet budgeted In essence, RQ’s proposal is prizemoney. RQ needs to be able to react in a timely manner • The base and variable prizemoney structure is designed to provide not dissimilar to the current where wagering revenue is not meeting budget expectations. participants with certainty in that their prizemoney returns will not fall below a set level. It will also provide the opportunity for process. However what RQ • It is likely that industry participants have geared their businesses for increased returns from revenue growth. is proposing is more the current prizemoney levels, and therefore it is necessary to phase any correction to prizemoney over a number of months. • The tables on the following pages set out the current prizemoney transparent, timely and level as against the proposed prizemoney levels for the three codes reflecting levels of wagering of racing. revenue and the overall financial performance of the organisation.

75 Tracking Towards Sustainability TBP.001.031.0172

Sustainability Plan Expenditure Options – Variable Prizemoney Example

6 5 The graph to the right sets 4 $4m out a simplified example of Millions 3 Over Achieved how the performance of RQ Budget 2 Budget will impact the proposed RQ Budget 1Profit variable component of 0 $3.5m prizemoney. Under (1) Budget The model provides a (2) number of benefits: (3) Quarter 1 Quarter 2 Quarter 3 Quarter 4 • Ensures participants are getting the highest return In Quarter 1, RQ exceeded In Quarter 2, RQ performed RQ achieved budget in possible within RQ’s budget by $4m. Variable below budget by $3.5m. Quarter 3, as such variable Returns to Participant Variable returns to financial capacity returns to participants categories will be increased Participant categories will be remain at standard levels • Provides transparency to in Quarter 3 reduced in Quarter 4 the industry regarding RQ’s performance

120 • Provides an incentive to 110 all participants to grow Millions 100 22.0 22.0 24.4 19.9 22.0

revenue and to control 90 and be accountable for the expenditure of 80 industry funds. 70 88.0 88.0 88.0 88.0 88.0

Prizemoney 60

50 Quarter 1 FY16 Quarter 2 FY16 Quarter 3 FY16 Quarter 4 FY16 Quarter 1 FY17

Base Variable

76 Tracking Towards Sustainability TBP.001.031.0173

Sustainability Plan Expenditure Options – Thoroughbred Prizemoney

Proposed Variable Prizemoney Structure Set out to the right is an indicative prizemoney Category Standard Base Variable Total PM Pre 30 % Change PM Budget % Change Meeting Proposed Proposed Proposed Sep 2014 on Pre 30 FY16 on Budget structure proposed for Details 80% 20% 100% Sep 2014 FY16

Thoroughbred Racing 6 races @ $60,000 Metro $368,000 $92,000 $460,000 $380,000 21.1% $520,000 (11.5%) 2 races @ $50,000 A base prizemoney has been set for each category of Metro Midweek 8 races @ $18,000 $115,200 $28,800 $144,000 $136,000 5.9% $160,000 (10.0%) meeting with a variable Public Holiday Metro 8 races @ $20,000 $128,000 $32,000 $160,000 $136,000 17.7% $400,000 (60.0%) component that will depend on the financial performance Public Holiday Provincial 8 races @ $17,500 $112,000 $28,000 $140,000 $96,000 45.8% $160,000 (12.5%) of RQ Provincial 1 8 races @ $14,000 $89,600 $22,400 $112,000 $104,000 7.7% $128,000 (12.5%)

Provincial 1 SKY 2 8 races @ $13,000 $83,200 $20,800 $104,000 $104,000 - $96,000 8.3%

Provincial 2 8 races @ $12,000 $76,800 $19,200 $96,000 $88,000 9.1% $112,000 (14.3%)

Provincial 3a 8 races @ $12,000 $76,800 $19,200 $96,000 $84,000 14.3% $104,000 (7.7%)

Provincial 3 8 races @ $11,000 $70,400 $17,600 $88,000 $84,000 4.8% $96,000 (8.3%)

Provincial 3 SKY 2 8 races @ $10,000 $64,000 $16,000 $80,000 $80,000 - $80,000 -

Provincial 3a SKY 2 8 races @ $10,000 $64,000 $16,000 $80,000 $80,000 - $80,000 -

Non-TAB 5 races @ $5,500 $27,500 - $27,500 $30,000 (8.3%) $35,000 (21.4%)

Picnic 5 races @ $2,000 $10,000 - $10,000 $10,000 - $10,000 -

77 Tracking Towards Sustainability TBP.001.031.0174

Sustainability Plan Expenditure Options – Harness Prizemoney

Proposed Variable Prizemoney Structure Set out to the right is an indicative prizemoney Category Standard Meeting Base Variable Total Average Average PM Per Race % Details Proposed* Proposed* Proposed PM Proposed PM per race per Change on structure proposed for Per Meeting per Race FY16 Budget Budget FY16

Harness racing. 8 races @ $4,000 $31,509 $3,992 $35,501 3,944 5,000 (21.1%) A variable component has Albion Park Friday 1 race @ $3,501 been included in the prizemoney for Albion Park 1 race @ $13,000 meetings. No variable Albion Park Saturday 5 races @ $11,000 $72,800 $18,200 $98,000 9,800 10,600 (7.5%) 4 races @ $7,500 component will initially be included within standard 7 races @ $5,000 Albion Park Tuesday $31,509 $10,493 $42,002 4,667 5,600 (16.7%) prizemoney at Redcliffe, 2 races @ $3,501 however a variable Marburg Sunday 5 races @ $1,501 $7,505 - $7,505 1,501 1,500 - component may be introduced if there is an Redcliffe Wednesday 8 races @ $3,501 $28,008 - $28,008 3,501 3,501 - increase in wagering return. Redcliffe Tuesday 5 races @ $1,501 $7,505 - $7,505 1,501 1,500 -

Redcliffe Thursday 9 races @ $4,000 $31,509 - $36,000 4,000 4,400 (9.1%)

Deagon Sunday 8 races @ $2,500 $20,000 - $20,000 2,500 2,500 -

Grass Sunday 8 races @ $2,500 $20,000 - $20,000 2,500 2,500 -

Kilcoy Sunday 3 races @ $2,500 $7,500 - $7,500 2,500 2,500 -

Marburg Saturday 5 races @ $1,501 $7,505 - $7,505 1,501 1,500 -

*The base prizemoney levels are set in reference to the minimum prizemoney level of $3,501 per race in accordance with penalty thresholds.

78 Tracking Towards Sustainability TBP.001.031.0175

Sustainability Plan Expenditure Options – Greyhounds Prizemoney

Proposed Variable Prizemoney Structure Set out to the right is an Category Standard Meeting Base Variable Total Average Proposed Average PM per % Change on indicative prizemoney Details 80% 20% 100% PM per Race Race FY16 Budget Budget FY16 structure proposed for 2 races @ $1,800 Greyhound racing Brisbane Monday 7 races @ $2,160 16,848 4,212 21,060 2,106 2,850 (26.1%) 1 race @ $2,340

A base prizemoney has been 4 races @ $1,350 Brisbane Sunday 6 races @ $1,530 14,400 3,600 18,000 1,500 2,043 (26.6%) set for each category of 2 races @ $1,710 meeting with a variable 7 races @ $5,400 1 race @ $7,200 amount that will depend on Brisbane Thursday 46,800 11,700 58,500 5,850 7,363 (20.5%) 1 race @ $5,850 the financial performance of 1 race @ $7,650

RQ against budget. 2 races @ $1,800 Brisbane Wednesday 7 races @ $1,980 15,696 3,924 19,620 1,962 2,660 (26.2%) 1 race @ $2,160 Bundaberg, Capalaba & Cairns Saturday, Cairns 8 races @ $630 4,032 1,008 5,040 630 760 (17.1%) Sunday and Capalaba Tuesday

3 races @ $1,350 Ipswich Tuesday 4 races @ $1,530 12,240 3,060 15,300 1,530 2,043 (25.1%) 3 races @ $1,710

3 races @ $1,350 Ipswich Friday 4 races @ $1,530 12,240 3,060 15,300 1,530 2,043 (25.1%) 3 races @ $1,710

2 races @ $1,800 2 races @ $2,980 Ipswich Saturday 16,560 4,140 20,700 2,070 2,660 (22.2%) 5 races @ $2,160 1 race @ $2,340

2 races @ $900 Rockhampton 5 races @ $1,080 8,928 2,232 11,160 1,116 1,245 (10.4%) Wednesday 2 races @ $1,260 1 race @ $1,440

2 races @ $900 6 races @ $1,080 Townsville Tuesday 10,800 2,700 13,500 1,125 1,245 (9.6%) 3 races @ $1,260 1 race @ $1,440

79 Tracking Towards Sustainability TBP.001.031.0176

Sustainability Plan Expenditure Options – Prizemoney Summary

Summary of Changes by Code • The figures in the table to the left include the impact of the country racing adjustments as discussed on page 83. After excluding the Total prizemoney for • The table below sets out the summary of changes in prizemoney for reduction in thoroughbred country racing prizemoney, there is a Thoroughbred TAB and the three racing codes between FY14 to FY17. $8.5m reduction to thoroughbred prizemoney. Greyhound racing is Racing Code FY14 FY15 FY16 FY17 FY14- Harness proposed to increase by Budget ‘Corrected’ FY17 Increase • Due to the significant shortfall Harness is facing in the FY16 12.6% and 6.2% respectively. Thoroughbred $77.9m $87.2m $98.3m $85.2m 9.3% budget, prizemoney has generally been reduced back to the level at 30 September 2014. Whilst the increase in TAB $69.6m $77.6m $88.0m $78.4m* 12.6% • Whilst RQ has endeavored to include a base and variable prizemoney for Greyhound Non-TAB $8.3m $9.6m $10.3m $6.8m** (18.6%) component for prizemoney across the three codes, the reducing in racing appears higher than Harness $13.5m $14.9m $16.3m $13.3m (1.3%) Harness is limited by the penalty thresholds. the other codes, it is a Greyhounds $10.4m $12.9m $14.3m $11.0m 6.2% • As such, no variable component has been proposed for racing function of 438 additional TOTAL $101.7m $115.0m $128.9m $110.1m 8.3% outside of that which is conducted at Albion Park. races being run in FY17 as • Should the performance of RQ exceed budget, then RQ may opposed to FY14. The Thoroughbred consider introducing a variable component for non-Albion Park average prizemoney per race • The table on page 77 sets out the proposed changes to the harness racing. is proposed to decrease by thoroughbred prizemoney levels. • Feature prizemoney across a number of meetings has also been 2%. • Prizemoney is generally above the level set prior to 30 September amended, resulting in a $515k reduction in prizemoney. 2014, however prizemoney for non-TAB racing has been reduced • Although total prizemoney for harness has reduced from $13.5m in Due to the higher loss to $5,500 per race for both strategic and non-strategic venues. FY14 to $13.3m in FY16, the average prizemoney per race is budgeted for Harness • The reduction in prizemoney for non-TAB racing is also as a result proposed to increased from $5,343.94 in FY14 to $5,487.92 in racing, a reduction of 1.3% of reducing non-TAB races by 50 meetings (10 meetings from the FY17. has been applied to its total Queensland Country Racing Series, and 40 from standard non TAB Greyhound events). prizemoney pool between • Whilst total prizemoney is proposed to increase by 6.2% from FY14 • TAB meetings have been reduced by 10 meetings due to the FY14 and FY17. to FY17, it must be noted that the number of races is proposed to proposed discontinuance of the Queensland Country Racing Series increase by 8% from 5,475 in FY14 to 5,913 in FY17. as discussed on page 83. • Under the proposed prizemoney levels, the average prizemoney • The prizemoney for feature races has been reduced by $500,000 per race is therefore proposed to decrease by 2% from $1,893.54 in as a result of reducing the Stradbroke from $2m in the FY16 budget FY14 to $1,862.64 in FY17. to $1.5m.

*Note the corrected FY17 TAB Thoroughbred prizemoney includes the impact of the discontinuance of the Country Racing Series, as discussed on page 83. *Note the corrected FY17 Non-TAB prizemoney includes the impact of the reduced non- TAB meetings as discussed on page 83.

80 Tracking Towards Sustainability TBP.001.031.0177

Sustainability Plan Expenditure Options – Country Racing

Country thoroughbred racing Current structure • Further to the discussion on page 59 in relation to the potential for • It was generally accepted in the consultations that the current Participants generally Government contributions to country thoroughbred racing, this country racing structure is not sustainable. In FY15, RQ paid accepted in the section outlines the proposed future structure for country racing. $5.3m in prizemoney above its minimum requirement under the Racing Act of 5.32% of the UBET Product and Program fee. consultations that the • The proposed structure seeks to provide the following in a cost volume of country racing in effective manner: • A further $9.2m was spent by RQ in order to facilitate country racing by providing stewards, paying club administration and Queensland is not • Social benefit for country communities; subsidy payments, subsidising insurance and providing further TAB sustainable. • A racing economy for rural owners, trainers, breeders, jockeys, prizemoney for non-TAB clubs. clubs and other racing related participants; Non-TAB thoroughbred • Although Non-TAB racing provides obvious social and economic • A safe racing environment for all participants; benefits for country communities, Non-TAB racing does not racing accounts for over produce wagering returns to the industry. There is thus no income 40% of meetings in • Continual improvement and training programs to ensure racing to offset the costs. intellectual property is retained in the country regions; Queensland and does not • The geographical nature of Queensland makes country racing • Links between community events and the scheduling of race generate a wagering return challenging in comparison with the other States and Territories of meetings to enhance patronage and other sources of funding; Australia. to RQ. • Ensuring that Non-TAB races do not detract from field sizes at • The table below shows that Queensland runs the highest number of nearby TAB meetings; and Non-TAB thoroughbred race meetings in Australia. Moreover, the • The scheduling of circuits to provide more regular racing and number of Non-TAB meetings in Queensland is greater than the cost efficiencies in terms of stewarding and other race day combined number of Non-TAB meetings held by all of the other costs. States and Territories combined.

TAB vs. Non-TAB Racing 2014/15 QLD NSW VIC SA WA TAS NT ACT

TAB Meeting 404 615 502 187 270 69 74 26

Non-TAB Meeting 273 123 47 9 26 8 1 -

Total Meetings 677 738 549 196 296 77 75 26

% of Non TAB to Total Meetings 40.3% 16.7% 8.6% 4.6% 8.8% 10.4% 1.3% -

TAB Races 3,051 4,611 4,052 1,420 2,086 568 412 201

Non TAB Races 1,419 669 290 52 157 42 6 -

Total Races 4,470 5,280 4,342 1,472 2,243 610 418 201

% of Non TAB to Total Races 31.7% 12.7% 6.7% 3.5% 7.0% 6.9% 1.4% - Source: Racing Australia, 2014/15 Fact Book Early Edition 81 Tracking Towards Sustainability TBP.001.031.0178

Sustainability Plan Expenditure Options – Country Racing

89% of Non-TAB meetings Current structure (cont.) Number of FY16 Number of Non- Non-TAB Clubs TAB Meetings are conducted on Saturdays, • In comparison to the other States and Territories, Queensland has in order to provide clubs 115 thoroughbred clubs, which is the second highest behind NSW 55 1 which has 120 clubs. with the best opportunity to 18 2 • 107 of the 115 Queensland thoroughbred clubs run Non-TAB increase patronage and turn 7 3 meetings. The table to the right provides a comparison of the a profit. volume of meetings run by these non-TAB clubs. 7 4

• 68% of Non-TAB clubs run either one or two race meetings each 4 5 year. 3 6 • Of the 107 clubs, 28 are designated ‘strategic non-TAB’, meaning 4 7 that they are strategically located to ensure regional sustainability. RQ intends to change classification to not distinguish between 5 8 strategic and non-strategic to reflect the nature of non-TAB events. 2 9 • Under the current model, strategic non-TAB clubs are provided with 1 10 a subsidy payment of $3,000 for each meeting they hold. RQ has included $483,000 in per meeting subsidies for strategic non-TAB 1 14 clubs in the FY16 budget. 107 288 • RQ has budgeted a further $205,000 in club subsidy payments for the Queensland Country Race Series and for TAB clubs which hold Non-TAB race meetings. • As Non-TAB meetings are primarily community events, nearly 89% of meetings are scheduled to be held on a Saturday to allow high- levels of patronage and to provide the respective clubs with a greater chance to turn a profit. • To encourage owners and trainers to run at the non-TAB meetings, many clubs ‘value-add’ to prizemoney. In FY15, non-TAB clubs value added approximately $1.43m to prizemoney. • Participants in the consultations noted however that encouraging owners and trainers to run at non-TAB meetings reduces field sizes at nearby TAB meetings which may in turn reduce wagering revenue.

82 Tracking Towards Sustainability TBP.001.031.0179

Sustainability Plan Expenditure Options – Country Racing

It is proposed to use a Proposed structure 4. A reduction in the per meeting subsidy payment for strategic non-TAB meetings to $1,000 and limiting the value add • RQ proposes that the following changes be implemented from 1 portion of the funds saved to prizemoney for non-TAB prizemoney to 50% of sponsorship July 2016: develop a regional hub and raised. The intention of this measure is to direct clubs to use spoke based model for 1. The removal of the Country Queensland Showcase Series sponsorship moneys to maintain facilities and provide (which is TAB covered), the Celebrate Country Series and the community events. country racing. Sustain Country Series. The feedback received from the Proposed strategy consultations was that the various Country racing series do not

provide the same level of value to the community as the • It is proposed to use a portion of the funds saved to develop a standard non-TAB meetings. regional hub and spoke based model for country racing whereby: 2. A further reduction in the number of non-TAB meetings, where • A central hub in each region will be upgraded to TAB status and clubs that race between four to seven times a year are reduced will race on a regular basis, and to three meetings each. The purpose of reducing these • The remaining clubs in the region will race between one to two meetings is to increase field sizes at nearby TAB courses, and times per year. allowing race meetings to run on a four monthly basis for community benefit. Clubs may obtain funding for an additional • The purpose of the hub and spoke model is to derive an income race meeting or meetings from alternative sources i.e. from country racing, which can be used to: sponsors, regional councils and community action. In that event, RQ will facilitate the conduct of any such meeting, • Improve country racing facilities; agreeing an appropriate date with the club in question. RQ • Increase prizemoney to improve returns to participants; may also be willing to provide an additional meeting or meetings subject to the club providing adequate subsidisation • Provide training to regional areas to ensure racing intellectual of the stewarding and race day costs incurred by RQ. property is retained in Country areas, which may allow RQ to assess whether a regional stewarding model can be 3. A reduction in strategic and non-strategic prizemoney levels. implemented.

Prizemoney Subsidies QTIS @ 70% Race Day and TAB Revenue Net Reduction Jockeys 1. Country Race Series (inc TAB meetings) $1,414,000 $89,331 $35,000 $315,797 ($585,503) $1,269,094 2. Reduction in Meetings $1,420,000 $117,000 $49,000 $401,681 n/a $1,987,681

3. Strategic and Non-Strategic Prizemoney $1,778,500 n/a n/a n/a n/a $1,778,500 4. Subsidy reduction n/a $242,000 n/a n/a n/a $242,000 Total $4,612,500 $448,331 $84,000 $717,478 ($585,503) $5,276,806 Sinking Fund for Reinvestment @ 20% ($1,055,455) Net Saving $4,221,351

83 Tracking Towards Sustainability

TBP.001.031.0180

Sustainability Plan Expenditure Options – Other Reductions

A number of services and Marquees and Super Screens • However, participants also acknowledged that the current cost structure was not appropriate, and that the awards nights should be • Over the last two financial years, RQ purchased large marquees events are currently paid for held at racing venues in order to keep funds within the industry. by RQ for the benefit of the and super screens in order to provide clubs with the opportunity to ‘rent’ these assets to improve the race day experience at a lower • Following this feedback industry task groups were formed to industry. cost than available in the open market. organise the awards nights on a close to cost neutral basis. Based on the ‘user pays’ • To date there has been an underwhelming response from clubs, • It is anticipated that each event will again run on a cost neutral and the assets have only been rented on a handful of occasions. basis, and therefore RQ estimates a cost saving of approximately governing principles of the $178,000 on the FY16 budget. sustainability plan, RQ is • Due to the size and nature of these assets the maintenance and storage costs are material. Albion Park Costs currently assessing the financial saving from • With regard to the super screens, RQ budgeted approximately • In conjunction with the Albion Park Harness Club, RQ is currently $67.4k of revenue from hire fees against $116.7k of maintenance undertaking an assessment of the Albion Park facility costs. passing such costs onto and storage expenditure. • $930k is budgeted for Albion Park facility expenditure in FY2016, participants. • No revenue was budgeted for the hire of marquees (only $15k was including: generated in FY2015) against $97.8k for storage and maintenance. • Electricity of $280k • RQ is currently assessing its options in relation to these assets. • Water and waste management of $208k, and Should it not be economically feasible to offer this service to clubs, RQ will dispose of these assets prior to 30 June 2016 so that • Rates of $24k maintenance and storage costs are not incurred thereafter. • RQ is targeting a cost reduction of $160,000 to $200,000 per • The annual saving on the FY16 budget will therefore be annum by: approximately $147k. • Reviewing the procedures in place for use of the lights Awards Night • Investigating whether management of waste and water can be • RQ holds annual awards nights for the three racing codes to more efficient celebrate the achievements of the industry’s participants. • Enquiring of Council whether rate relief or special grants are • In FY15, the cost incurred by RQ to organise and hold the three available awards nights was $178k and the same amount was budgeted against in FY16. • Commercialising the lease arrangements for the Albion Park tenants to ensure outgoings are being appropriately on-charged. • The awards nights were discussed within the industry consultations, and participants confirmed the importance of the events to industry. • Securing discount on maintenance when combining service arrangements with the Deagon facility.

84 Tracking Towards Sustainability TBP.001.031.0181

Sustainability Plan Expenditure Options – Other Reductions

A number of services and Camera Control Unit Costs – Harness Racing Greyhound Trainers Appearance Fees events are currently paid for • The Harness clubs currently negotiate the media rights agreement • With concerns within the community of a significant number of dogs by RQ for the benefit of the with SKY Racing. being bred for racing that do not make it to the track or are deemed unsuitable for racing at an early age, it is deemed contradictory that • Under this agreement, the Harness clubs received media rights industry. that trainers are paid a fee to attend a race. revenue of approximately $381k in FY14. Based on the ‘user pays’ • However it is also recognised that many hobby trainers supply dogs • RQ currently pays for the SKY vision camera control unit which for racing that will win very few races. governing principles of the totals approximately $769k per year. Given the Harness clubs sustainability plan, RQ is benefit from this expenditure, it is considered appropriate that a • These industry participants play a role in the industry but rely on the portion of such expenses are passed on to the clubs. RQ intends trainers appearance fee as a way to subsidise the feed and currently assessing the to pass $300k of this cost on to the harness clubs in FY17, and will veterinary costs of racing. With this in mind it is deemed financial saving from consider passing the full cost on in future periods. appropriate to pay the appearance fees to those participants. passing such costs onto • In the longer term, RQ will consider its position in relation to • There are concerns however, that the current appearance fee being participants. negotiating the SKY agreement on behalf of Harness clubs in an paid to trainers is not being used for the purpose intended. effort to provide a better outcome. • Based on the above, RQ deems it appropriate to make the following

On-Course Fielding Incentive Scheme changes regarding the appearance fee: • Historically bookmakers paid clubs a fee for the privilege of • Unplaced starters’ fee standing on course to take bets. Currently RQ pays a portion of • From January 2016 the fee be changed to a unplaced this fee on behalf of bookmakers, which in FY15 amounted to starters’ fee where dogs finished 4th to 8th will receive $15 approximately $727k. per dog; • This scheme was introduced as the decline in volume of betting on • Only dogs that start will receive the fee; and course made it less attractive for bookmakers to stand. • Fee would be paid as part of the weekly prizemoney run. • Due to the significantly changed wagering landscape, RQ deems it • This adjustment will reduce the total appearance fees included appropriate that bookmakers and clubs come to their own in the FY16 budget by approximately $250k. arrangements regarding on course standing fees. • To ensure the Trainer’s appearance fee is being spent in the • It is anticipated that this will provide a cost saving of $783k against manner intended, in the longer term RQ intends to issue a voucher the FY16 budget. mechanism where the fee can be claimed for goods and services. • The types of establishments where goods can be claimed may include:

• Veterinary surgeries, • Dog Racing Suppliers.

85 Tracking Towards Sustainability TBP.001.031.0182

Infrastructure TBP.001.031.0183

Sustainability Plan Infrastructure

Racing is a capital-intensive Background Key principles industry and the • Racing is a capital-intensive industry, and the maintenance and • The key principles of the infrastructure process being developed by maintenance and redevelopment of infrastructure is a continuing issue for clubs and Queensland Treasury include: their management boards. redevelopment of • Transparent, consistent and robust process • A significant portion of the racing infrastructure in Queensland is infrastructure is an ongoing • Accountability and role clarity (to be aligned with broader racing ageing, and many facilities are subject to constant use, such as industry and governance review) issue for clubs and their Albion Park which is currently used every night. • Establish needs/costs, and seek to maximise benefits and management boards. • Queensland has 104 thoroughbred racing tracks: the second balance other industry objectives highest number in Australia, behind NSW. An added complexity is the regional location of many of the tracks due to the size of • “Staged gate” decision making process, with an independent Queensland. body to recommend investments decisions based on an established selection criteria and an appropriate level of • As part of the new wagering agreement that commenced on 1 July feasibility analysis. 2014, UBET committed to provide $97.4m over nine years for infrastructure upgrades across the racing industry. • It is proposed to develop a new planning, application and assessment framework and processes to address these key • Unless cash reserves can be retained from trading surpluses, the principles. UBET infrastructure funds, together with the remaining funds under the Racing Infrastructure Capital Development Scheme are the only Indicative Framework funds available for industry infrastructure projects for potentially the next 30 years. • The planning framework is likely to involve an overall Racing Industry Infrastructure Plan, which will identify and prioritise target • To best place the racing industry for growth, it is essential that the objectives, key infrastructure projects and concerns for the industry. infrastructure funding from UBET is used in an effective manner. • The priority target objectives and infrastructure projects will then be • In order to do so, a review of the framework and process for included in a longer term rolling plan, which is intended to be planning, approval, funding and development of racing updated on an annual basis. infrastructure in Queensland is being carried out by Queensland Treasury in consultation with: Application, Evaluation and Approval Process • The Department of Premier and Cabinet • The structure of the infrastructure process is still under development. However, it is intended that clubs and RQ will be • The Department of National Parks, Sport and Racing (including required to submit applications to an independent panel, which will the Office of Racing), and assess each application against a pre-determined criteria. • Racing Queensland.

87 Tracking Towards Sustainability TBP.001.031.0184

Sustainability Plan Infrastructure

Subject to Government Application, Evaluation and Approval Process Timeframe approval, Queensland • It is intended to implement a periodic process for submissions from • Subject to Government approval, Queensland Treasury intends to Treasury intends to clubs or RQ similar to other Grant funding schemes administered implement the new infrastructure process in the new year in by the Government. conjunction with the development of the racing industry’s longer implement the new term sustainability plan. • Furthermore, it is intended to require the approval of the relevant infrastructure process in the Government Minister for each project, following independent • A post-implementation review (and ongoing audits) will be included new year in conjunction with consideration by the panel. in the plan to ensure that processes are being complied with, the development of the objectives are being achieved and that there are no adverse Indicative Criteria impacts of the new framework. racing industry’s longer term • It is intended to set a broad set of criteria to encourage ideas from sustainability plan. clubs and RQ and allow the widest variety of projects to be considered. • It is intended however, to have a different set of criteria for community versus commercial projects. Racing Implementation/ Industry • Examples of suggested criteria include: benefits review of Strategic approved projects Plan(s) • Demonstrated need for the project; • Value for money (including cost/benefit analysis and consideration of project risks); • Demonstrated benefit to the industry, the club and broader community and link to club and industry long term strategies;

Racing • Feasibility; and Project Industry approval and Infrastructure development • Improvement in non-traditional venue use (e.g. development of Plan multi-purpose facilities). • The criteria have not been finalised. However they will need to be consistent with the longer term racing industry strategic plan, as Project Application well as the Racing Industry Infrastructure plan. and Assessment Guideline

88 Tracking Towards Sustainability TBP.001.031.0185

Animal Welfare TBP.001.031.0186

Sustainability Plan Animal Welfare

Racing Queensland is Background • Racing Queensland has been commended for its proactive approach to the live-baiting scandal by several animal welfare • RQ acknowledges that the welfare of all racing animals is recognised nationally as the groups and is recognised nationally as the leading authority in paramount to a sustainable racing industry. leading authority in addressing animal welfare issues. • Animal welfare is the most critical social issue for all racing codes. addressing animal welfare • Specifically, in relation to the live baiting scandal RQ’s response issues. • As shown by public reaction to the Four Corners exposé of live has included: baiting in February 2015, maltreatment of or cruelty of any kind to • Completing more than 700 kennel inspections Racing Queensland has animals may jeopardise an industry's social license to operate. • Vision from the Four Corners program was acquired and been commended for its • Whilst live-baiting was about ritualised and unscrupulous cruelty, analysed resulting in 22 trainers being warned off and a further proactive approach to the the most significant issue facing all codes of racing is euthanasia 15 suspended and life after racing. live-baiting scandal by • Continuing to work with the Queensland Police Service to being several animal welfare • The MacSporran recommendation in relation to the functional about further prosecutions structure of the racing industry is that animal welfare becomes part groups. • Implementing mandatory statutory declarations for greyhound of QRIC. trainers licensing (to the effect that trainers have not been • This section provides an outline of what RQ is currently doing to involved in live baiting practices) address animal welfare concerns and discusses the plan for the • Undertaking mandatory training and educational modules, and future. • Implementing drone surveillance from mid-October 2015 Greyhounds • RQ is also in the process of implementing systems and processes • Following a joint investigation by Queensland Police Service and to enable the life-cycle tracking of greyhounds, including: the RSPCA and the subsequent Four Corners exposé in February • The introduction of a whelping license 2015 of “live-baiting” in the training of greyhounds, the greyhound racing industry became embroiled in the most significant scandal in • The introduction of a rearing license the sport’s history. • The introduction of a breeding female license, and • The live-baiting scandal has had a devastating effect on racing’s • Tightened regulations around retirement processes and brand and in particular the brand of greyhound racing. However, reporting. once the practice was uncovered, Racing Queensland took decisive action.

90 Tracking Towards Sustainability TBP.001.031.0187

Sustainability Plan Animal Welfare

The number of Greyhounds Greyhounds Continued… • Racing Queensland has significant relationships with organisations like “After” which actively work to retrain and then rehome retired • Additionally, a key strategy to address welfare concerns is to rehomed via the RQ GAP racehorses. has grown from control the breeding levels of greyhounds. In this regard, RQ has: • Implemented rules governing the number of litters a breeding • There is no model for racehorses similar to GAP in existence. approximately one rehoming female may produce; • Unlike greyhounds however, markets exist for repurposing slow or per week, to one rehoming • Lowered the trainer appearance fee (and now proposes to only retired animals. per day pay this fee to unplaced starters); • The sporting and pleasure horse industry is large. • Increased litter registration fees; • The most highly represented breed of horse in the sporting • Abandoned the QGreys breeding scheme; and horse market is the thoroughbred. • Implemented modules of genetics education. • Many thoroughbreds possess valuable attributes including Greyhound Adoption Program athleticism, stamina and beauty which are highly attractive qualities for a pleasure or sporting horse. • The Greyhound Adoption Program of Queensland is a non-profit • Some harness horses have competed successfully in sporting program of RQ. The purpose of this program is to increase and horse competitions. However, they are not the all-round improve the public’s awareness and desire to care for Greyhounds performer that thoroughbreds are and rehoming is somewhat in a loving environment once their racing careers have finished. more difficult. • The program has recently seen improved results due to a number • Importantly, many trainers and owners already have networks in of initiatives of RQ including: place that allow them to rehome racehorses. • The appointment of an RQ welfare officer; • In order to establish a sustainable system for rehoming racehorses, • The promotion of the program at the EKKA and across social a multifaceted program needs to be undertaken that: media channels; and • Broadens owner exposure to responsibilities for Life after • The introduction of a Greyhound Open Day. racing; • The number of greyhounds being rehomed via the RQ adoption • Maintains and enhances the existing rehoming network; program has grown from approximately one rehoming per week to • Creates a shop front for rehoming by leveraging an existing one rehoming per day. retraining structure; and Equine • Creates value in retired racehorses within the pleasure and sport horse markets (noting that over several decades, • Rehoming and euthanasia are key issues facing the equine codes retired racehorses have become less fashionable in favor of of racing. Warmbloods, for example).

91 Tracking Towards Sustainability TBP.001.031.0188

Appendix 1 – Cross Subsidisation by Code TBP.001.031.0189

Sustainability Plan Schedule of Financial Impact - Summary

All Codes Summary FY17 Preliminary Other Country Racing FY16 Budget FY15 Actual FY14 Actual FY17 to FY14 Adjustments Adjustments

Revenue

• Thoroughbred 170.3 5.0 (0.6) 165.9 168.3 156.6 8.8%

• Harness 22.4 0.1 - 22.2 23.0 27.4 (18.3%)

• Greyhounds 28.9 0.1 - 28.8 32.6 20.5 41.0%

Total Revenue 221.6 5.2 (0.6) 216.9 223.9 204.5 8.4%

Expenditure

• Thoroughbred 163.0 (12.3) (4.8) 180.0 171.2 153.6 6.1%

• Harness 27.9 (4.5) - 32.4 30.1 29.4 (5.1%)

• Greyhounds 29.2 (3.3) - 32.5 33.8 25.4 15.0%

Total Expenditure 220.1 (20.1) (4.8) 244.9 235.1 208.4 5.5%

Surplus/(Deficit) 1.5 (28.0) (11.2) (3.9)

The sustainability measures result in an anticipated surplus of approximately $1.5m for FY17

93 Tracking Towards Sustainability TBP.001.031.0190

Executive Summary Stakeholder Summary - Thoroughbreds

FY17 Preliminary Other Country Racing FY16 Budget FY15 Actual FY14 Actual FY17 to FY14 Adjustments Adjustments

Revenue

Wagering Revenue 156.2 3.8 (0.6) 153.0 150.8 135.7 15.1%

Racing Fees 6.7 0.4 6.3 5.1 5.3 26.4%

Grants and Other Contributions 1.8 0.8 1.0 6.4 10.5 (82.9%)

Other Revenue Items 5.6 (0.1) 5.6 6.0 5.1 9.8%

Total Revenue 170.3 4.9 (0.6) 165.9 168.3 156.6 8.8%

Expenditure

Prizemoney

• TAB 78.4 (8.5) (1.0) 88.0 82.1 72.5 8.14%, 12.6% exc. sponsored prizemoney

• Non-TAB 6.8 - (3.6) 10.3 9.6 10.3 (34.0%), (18.6%) exc. FY14 sponsored prizemoney

QTIS 6.6 (1.6) (0.1) 8.3 6.3 6.0 10.0%

Supplies and Services 23.2 (0.7) 23.5 24.2 22.1 5.0%

Marquees and Super Screens - (0.2) - 0.2 0.1 - -

Awards Night - (0.1) - 0.1 - 0.1 -

On-course Fielding Incentive - (0.8) - 0.8 0.7 1.3 -

Employee Expenses 8.5 - - 8.5 7.5 6.7 26.9%

Wagering Expenses 27.6 - - 27.6 27.2 22.2 24.3%

Grants and Subsidies 10.8 (1.1) 0.6 11.2 11.8 11.3 (4.4%)

Other Expenditure 1.5 - - 1.5 1.7 1.1 36.4%

Total Expenditure 163.0 (12.3) (4.8) 180.0 171.2 153.6 6.1%

Surplus/(Deficit) 7.3 (14.1) (2.9) 3.0

94 Tracking Towards Sustainability TBP.001.031.0191

Executive Summary Stakeholder Summary - Harness

FY17 Preliminary Other FY16 Budget FY15 Actual FY14 Actual FY17 to FY14 Adjustments

Revenue

Wagering Revenue 21.3 21.3 21.3 25.9 (17.8%)

Other Revenue Items 1.1 0.1 0.9 1.7 1.5 (26.7%)

Total Revenue 22.4 22.2 23.0 27.4 (18.3%)

Expenditure

Prizemoney 13.3 (2.9) 16.3 15.9 13.9 (4.3%)

QBred 0.3 (1.0) 1.3 1.0 0.7 (57.1%)

Supplies and Services 3.8 - 3.8 3.6 4.9 (22.4%)

Venue Expenditure 0.4 (0.1) 0.5 0.5 0.5 (20.0%)

Video Operators (CCU) 0.5 (0.3) 0.7 0.7 0.7 (28.6%)

Awards Night - (0.0) 0.0 0.0 0.0 -

Employee Expenses 4.3 - 4.3 3.0 3.4 26.5%

Wagering Expenses 3.4 - 3.4 3.1 4.3 (20.9%)

Grants and Subsidies 1.5 (0.2) 1.7 1.9 0.5 200.0%

Other Expenditure 0.4 - 0.4 0.4 0.5 (20.0%)

Total Expenditure 27.9 32.4 30.1 29.4 (5.1%)

Surplus/(Deficit) (5.5) (10.2) (7.1) (2.0) 175%

95 Tracking Towards Sustainability TBP.001.031.0192

Executive Summary Stakeholder Summary - Greyhounds

FY17 Preliminary Other FY16 Budget FY15 Actual FY14 Actual FY17 to FY14 Adjustments

Revenue

Wagering Revenue 28.3 28.3 30.3 17.0 66.5%

Other Revenue Items 0.6 0.1 0.5 2.3 3.5 (82.9%)

Total Revenue 28.9 28.8 32.6 20.5 41.0%

Expenditure

Prizemoney 11.0 (2.6) 13.7 13.2 10.4 5.8%

Appearance Fees 0.6 (0.3) 0.9 1.4 0.5 20.0%

QGreys - - 0.2 0.0 -

Supplies and Services 4.8 - 4.8 4.6 4.4 9.1%

Venue Expenditure 0.6 (0.1) 0.7 0.9 0.7 (14.3%)

Awards Night - - 0.0 0.0 0.0 -

Employee Expenses 4.9 - 4.9 4.1 3.5 40.0%

Wagering Expenses 4.6 - 4.7 4.7 2.8 64.3%

Grants and Subsidies 2.2 (0.2) 2.4 4.1 2.5 (12.0%)

Other Expenditure 0.4 - 0.4 0.6 0.6 (33.3%)

Total Expenditure 29.2 32.5 33.8 25.4 15.0%

Surplus/(Deficit) (0.3) (3.7) (1.2) (4.9) (93.9%)

96 Tracking Towards Sustainability